A Dynamic Model of Demand for Private Health Insurance in Ireland

40 Pages Posted: 12 Dec 2006

See all articles by Claire Finn

Claire Finn

University College Dublin (UCD)

Colm P. Harmon

The University of Sydney - School of Economics; IZA Institute of Labor Economics

Date Written: November 2006

Abstract

The Irish health care system offers a tax financed, universal entitlement to public care at a nominal user fee, nonetheless 50% of the Irish population purchase private health insurance. This paper empirically models the propensity to insure as a function of individual and household characteristics using panel data analysis and compares three alternate approaches; a static, chamberlain-mundlak and dynamic specification. Using panel data from 1994 to 2000, we consider whether propensity to insure is in fact a function of heterogeneity or of state dependence. A range of individual and household characteristics is shown to influence propensity to insure. Overall the positive effect of education and income and the negative effect of poor health status remain robust across three specifications. In moving toward a dynamic specification, we show that persistence is a highly significant determinant of demand for private health insurance and also that it reduces the size of the coefficients on the regressors. The latter point highlights that while education, income and, to a lesser extent, health status have very large effects on probability of insuring, these effects are overestimated where no attempt is made to control for unobserved heterogeneity or state dependence.

Keywords: health insurance, dynamics, panel, unobserved heterogeneity, state dependence

JEL Classification: G22, I10, D01

Suggested Citation

Finn, Claire and Harmon, Colm P., A Dynamic Model of Demand for Private Health Insurance in Ireland (November 2006). IZA Discussion Paper No. 2472. Available at SSRN: https://ssrn.com/abstract=950918

Claire Finn

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland

HOME PAGE: http://geary.ucd.ie/behaviour/index.php?option=com_content&task=view&id=19&Itemid=19

Colm P. Harmon (Contact Author)

The University of Sydney - School of Economics ( email )

Rm 370 Merewether (H04)
Sydney, NSW 2006 2008
Australia

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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