Are Poor Families Risk Averse. A Theoretical and Empirical Investigation of theDemand for Health Insurance. Executive Summary and Final Report

摘要

The goal of this analysis is to understand whether or not poor families are riskaverse. If poor families are not risk averse, this would help to explain why a large number of them are without health insurance in this country. The theory of expected utility maximization predicts that low income families are the most risk averse. Since this prediction appears to conflict with the fact that the majority of the uninsured belong to low income, but working families, an alternative specification of the theory is proposed. Under this specification, families are not risk averse, and thus do not gain utility from the purchase of health insurance until they have reached a level of income above that necessary to meet basic needs. The hypotheses of the traditional and alternative specifications of the theory were tested using data from the 1977 National Medical Care Expenditure survey. The results indicate that families with low incomes tend to be risk preferring. It is understandable why a large number of them have not purchased private health insurance.