Something in the air: pollution and the demand for health insurance

Tom Y Chang, Wei Huang, Yongxiang Wang

Research output: Contribution to journalArticlepeer-review

45 Citations (Scopus)

Abstract

We find that daily air pollution levels have a significant effect on the decision to purchase or cancel health insurance in a manner inconsistent with rational choice theory. A one standard deviation increase in daily air pollution leads to a 7.2% increase in the number of insurance contracts sold that day. Conditional on purchase, a one standard deviation decrease in air pollution during the cooling-off(i.e. cost-free cancellation) period relative to the order-date level increases the return probability by 4.0%.We explore a range of potential mechanism and find the most support for projection bias and salience.

Original languageEnglish
Pages (from-to)1609-1634
Number of pages26
JournalReview of Economic Studies
Volume85
Issue number3
DOIs
Publication statusPublished - 1 Jul 2018
Externally publishedYes

Keywords

  • Projection bias
  • Salience

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