The empirical evidence about the effect of smoking on health care cost coverage is not consistent with the expectations based on the notion of adverse selection. This evidence is mostly based on correlational studies which cannot isolate the adverse selection effect from the moral hazard effect. Exploiting data from the Survey of Health, Aging, and Retirement in Europe, this study uses an instrumental variable strategy to identify the causal effect of daily smoking on perceived health care cost coverage of those at age 50 or above in 12 European countries. Daily smoking is instrumented by a variable indicating whether or not there is any other daily smoker in the household. A self-assessment of health care cost coverage is used as the outcome measure. Among those who live with a partner (72% of the sample), the result is not statistically significant which means we find no effect of smoking on perceived health care cost coverage. However, among those who live without a partner, the results show that daily smokers have lower self-assessed perceived health care cost coverage. This finding replicates the same counter-intuitive relationship between smoking and health insurance presented in previous studies, but in a language of causality. In addition to this, we contribute to previous studies by a cross-country comparison which brings in different institutional arrangements, and by using the self-assessed perceived health care cost coverage which is broader than health insurance coverage.
|Number of pages||19|
|Journal||International Journal of Health Economics and Management|
|Publication status||Published - Dec 2017|
- Adverse selection
- Health insurance
- Health care cost coverage
- Instrumental variable