Theories of adverse selection suggest that those who purchase insurance will be in worse health than those that decline insurance. George Akerlof (1970) points out this adverse selection can be muted for those offered insurance at a steep discount. We are interested in whether the logbook data can help us understand the dynamics of joining and leaving SKY micro-health insurance in rural Cambodia. We run three tests, one examining members who join SKY versus decline SKY, one comparing those who will versus will not soon join SKY, and one comparing those who will join SKY at regular versus deeply discounted prices.
Paper: Adverse Selection in Purchasing Health Insurance: Evidence from High-frequency Logbook Data