Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/125126 
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper No. 15-120/V
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
Little is known about perceptions of medical expenditure risks despite their presumed relevance to health insurance demand. This paper reports on a unique elicitation of subjective probabilities of medical expenditures from rural Ethiopians who are offered the opportunity to purchase health insurance. We find that expectations are positively correlated with past expenses to a degree that exceeds the serial correlation in realized expenditures, suggesting overestimation of persistence and underestimation of the potential gains from insurance. Despite the fact that forecast expenditures do predict realized expenditures to some extent, there is no evidence that expectations influence the decision to take out health insurance, although plans to insure are positively related to the perceived dispersion of medical expenses.
Subjects: 
Subjective probability
medical expenditure
out-of-pocket payments
adverse selection
health insurance
Ethiopia
JEL: 
D82
D84
I13
O12
Document Type: 
Working Paper

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