Catastrophic Medical Expenditure Risk

Tinbergen Institute Discussion Paper 12-078/3

42 Pages Posted: 24 Jul 2012

See all articles by Gabriela Flores

Gabriela Flores

University of Lausanne

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Multiple version iconThere are 3 versions of this paper

Date Written: July 23, 2012


Medical expenditure risk can pose a major threat to living standards. We derive decomposable measures of catastrophic medical expenditure risk from reference-dependent utility with loss aversion. We propose a quantile regression based method of estimating risk exposure from cross-section data containing information on the means of financing health payments. We estimate medical expenditure risk in seven Asian countries and find it is highest in Laos and China, and is lowest in Malaysia. Exposure to risk is generally higher for households that have less recourse to self-insurance, lower incomes, wealth and education, and suffer from chronic illness.

Keywords: medical expenditures, catastrophic payments, downside risk, reference-dependent utility, Asia

JEL Classification: D12, D31, D80, I13, I15

Suggested Citation

Flores, Gabriela and O'Donnell, Owen, Catastrophic Medical Expenditure Risk (July 23, 2012). Tinbergen Institute Discussion Paper 12-078/3, Available at SSRN: or

Gabriela Flores (Contact Author)

University of Lausanne ( email )

Quartier Chambronne
Lausanne, Vaud CH-1015

Owen O'Donnell

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA

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