American Economic Review: Vol. 104 No. 5 (May 2014)

Expand

Quick Tools:

Print Article Summary
Export Citation
Sign up for Email Alerts Follow us on Twitter

Explore:

AER - All Issues

AER Forthcoming Articles

Bundling Health Insurance and Microfinance in India: There Cannot Be Adverse Selection If There Is No Demand

Article Citation

Banerjee, Abhijit, Esther Duflo, and Richard Hornbeck. 2014. "Bundling Health Insurance and Microfinance in India: There Cannot Be Adverse Selection If There Is No Demand." American Economic Review, 104(5): 291-97.

DOI: 10.1257/aer.104.5.291

Abstract

Microfinance institutions have started to bundle their basic loans with other financial services, such as health insurance. Using a randomized control trial in Karnataka, India, we evaluate the impact on loan renewal from mandating the purchase of actuarially-fair health insurance covering hospitalization and maternity expenses. Bundling loans with insurance led to a 16 percentage points (23 percent) increase in drop-out from microfinance, as many clients preferred to give up microfinance than pay higher interest rates and receive insurance. In a Pyrrhic victory, the total absence of demand for health insurance led to there being no adverse selection in insurance enrollment.

Article Full-Text Access

Full-text Article

Additional Materials

Authors

Banerjee, Abhijit (MIT)
Duflo, Esther (MIT)
Hornbeck, Richard (Harvard U)

JEL Classifications

D82: Asymmetric and Private Information; Mechanism Design
G21: Banks; Depository Institutions; Micro Finance Institutions; Mortgages
G22: Insurance; Insurance Companies; Actuarial Studies
I13: Health Insurance, Public and Private
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance


American Economic Review


Quick Tools:

Sign up for Email Alerts

Follow us on Twitter

Subscription Information
(Institutional Administrator Access)

Explore:

AER - All Issues

AER - Forthcoming Articles

Virtual Field Journals


AEA Member Login:


AEAweb | AEA Journals | Contact Us