Titelaufnahme

We examine the relationship between locus of control (LOC) and the choice of having a supplementary health insurance. Drawing on longitudinal data from Germany, we document the following findings: First, we find robust evidence that an individual's internal LOC is associated with a higher a probability to take up supplementary private health insurance (SUPP). The effect of a one standard deviation change in an individual’s internal LOC on the probability to have a SUPP is equivalent to an estimated 14% change in household income. Second, we find that the positive association between self-reported health and SUPP becomes small and insignificant when we control for LOC, suggesting that LOC might be an otherwise unobserved individual trait that can explain advantageous selection into SUPP. Third, we find comparable results using data from Australia which enhances the external validity of our results.