These results suggest that adverse selection may not threaten the viability of voluntary health insurance. A caveat is that measurement error in the reported probabilities may weaken the test for adverse selection. Notwithstanding this limitation, measurement of household-specific distributions of future medical expenses is feasible and avoids relying on the cross-sectional variance, which provides an upwardly biased estimate of medical expenditure risk.
The authors acknowledge the financial support of the Netherlands Organisation for Scientific Research (NWO-WOTRO), grant number W07.45.103.00, the University of Goettingen, the Ethiopian Economics Association and the Swiss Agency for Development and Cooperation/National Science Foundation Programme for Research on Global Issues for Development through grant 400640_160374 (PI: Jürgen Maurer).
Yilma, Z., O’Donnell, O., Mebratie, A., Alemu, G. and Bedi, A.S. (2018), "Subjective Expectations of Medical Expenditures and Insurance in Rural Ethiopia", Health Econometrics (Contributions to Economic Analysis, Vol. 294), Emerald Publishing Limited, Bingley, pp. 23-55. https://doi.org/10.1108/S0573-855520180000294002
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