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Selection in the New Cooperative Medical Scheme——A Test with Multiple-Dimension Asymmetric Information
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TitleSelection in the New Cooperative Medical Scheme——A Test with Multiple-Dimension Asymmetric Information  
AuthorWang Dongni, Wang Guojun and Zhu Wei  
OrganizationSchool of Insurance, University of International Business and Economic;; 
Key WordsAdverse Selection; Moral Hazard; Social Medical Insurance 
AbstractGiven the voluntary nature of the participation in the New Cooperative Medical System (NCMS), the participation is inherently affected by private (and thus asymmetric) information owned by rural households. This asymmetric information might lead to adverse selection or advantageous selection, reducing the welfare of rural households. Therefore, the identification of the selection in the NCMS is necessary for welfare assessment of the NCMS. Instead of the previous focus on adverse selection caused by the private health risk information, we introduce other dimensions of asymmetric information and isolate the impact of moral hazard to test the potential selection by using a high-quality household survey data. Our results demonstrate that there exists no adverse selection in the dimensions of private information on health risk as well as cognition, yet cautiousness leads to the selection. We further show that it is moral hazard that increases the possibility of the NCMS participants going to hospital, while other unobservable information does not lead to the selection in the NCMS. 
Serial NumberWP1237 
  • Institute of Economics, Chinese Academy of Social Sciences
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