Review of Economic Studies Vol. 85 No. 3 2018
Something in the Air: Pollution and the Demand for Health Insurance
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.
- DOI
- 10.1093/restud/rdy016
- Volume
- 85
- Issue
- 3
- Pages
- 1609-1634
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib