Modeling Health Insurance Enrollment Decisions in the U.S., Under Preferences Endogeneity: A Bayesian Multinomial Probit Approach
Journal of Global Business and Trade, Vol.12, No.2, pp.1-14
14 Pages Posted: 1 Jun 2017 Last revised: 6 Jul 2017
Date Written: October 30, 2016
Early work on consumer health insurance preference modeling suggests that workers sorting among employment alternatives reflect their tastes for employment-sponsored health insurance. Focusing on examining the role of health insurance preferences on enrollment decisions into employment sponsored health insurance, this past literature assumes the effects of health insurance preferences to be statistically exogenous. Therefore, extending analysis beyond employment sponsored health insurance preference modeling, while relaxing the exogeneity assumption, this article models the effects of stated consumption preferences for health insurance on revealed choices of health insurance using a framework in which stated consumption preferences are assumed to be endogenous in the statistical sense. A discrete choice analysis is implemented where both stated preferences and choice outcomes are modeled using multinomial probit and estimated within the Bayesian paradigm using a full Gibbs sampler. This estimation strategy is one of the first of its kind in consumer preference modeling, and improves computational efficiency and overall simplicity compared to related work using full information maximum likelihood. The analysis uses data from the 2007 medical expenditure panel survey, and the results provide substantial evidence on the importance of stated consumer preferences on revealed consumption choices of health insurance in the US.
Keywords: Bayesian MCMC, consumer preferences, discrete choice, health insurance, multinomial probit
JEL Classification: C11, C25, C51, I12, I13
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