Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan

Fischer T, Frölich M, Landmann A (2023)

Publication Type: Journal article

Publication year: 2023

Journal

American Economic Journal: Applied Economics American Economic Association

Book Volume: 15

Pages Range: 313-340

Journal Issue: 3

DOI: 10.1257/app.20200639

Abstract

We present robust evidence on adverse selection in hospitalization insurance for low-income individuals that received first-time access to insurance. A large randomized control trial from Pakistan allows us to separate adverse selection from moral hazard, estimate how selection changes at different points of the demand curve, and test simple measures to limit adverse selection. The results reveal sub-stantial selection in individual policies, leading to welfare losses and the threat of a market breakdown. Bundling insurance policies at the household level or higher almost eliminates adverse selection, thus mitigating its welfare consequences and facilitating sustainable insurance supply. (JEL D82, G22, I13, I18, O15, O16)

Authors with CRIS profile

Andreas Landmann Lehrstuhl für Volkswirtschaftslehre mit dem Schwerpunkt Entwicklungsökonomik

Involved external institutions

Universität Mannheim DE Germany (DE) IDinsight IN India (IN)

How to cite

APA:

Fischer, T., Frölich, M., & Landmann, A. (2023). Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan. American Economic Journal: Applied Economics, 15(3), 313-340. https://doi.org/10.1257/app.20200639

MLA:

Fischer, Torben, Markus Frölich, and Andreas Landmann. "Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan." American Economic Journal: Applied Economics 15.3 (2023): 313-340.

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