In private health insurance health care systems, having medical
health insurance means that when one consumes health care the insurance company pays for the cost of the health care. This creates
potential problems of moral hazard, whereby individuals consume
more health care as they do not pay for it. To test this, a study
was conducted whereby 1, 153 individuals participated in a lottery.
If they won they were given full heath insurance for free. Those
that did not win the lottery did not receive health insurance from
the study but could buy it privately if they wanted. If individuals did
not get insurance from the study and opted not to buy insurance
privately they had to pay themselves for any health care they consumed. The dataset ECON2032 Q2 dataset.dta is from the first
year of the study and contains information on individuals’ health
expenditure (health expenditure measured in £), insurance status (insurance = 1 if individual has insurance and 0 otherwise),
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