U] as the level of treatment chosen ex post by a known high risk if offered policy U (obtained by conditions equivalent to those in equations (6a) and (6b)), the self selection conditions for such a separating equilibrium are:
expected utility if uninformed (in which case, the individual cannot avail himself of opportunities for reducing hazard and the low risk policy is selected from the self selection menu).
Using the self selection constraints (9a) and (9b), this becomes:
3] which is defined by contract H and the binding self selection constraints (9a) and (9b).
The initially informed low risks are strictly better off when the uninformed become informed because of the weaker self selection constraint in the two contract menu (as is the case with the treatment option).
For prospective migrants to rural areas, however, we find no evidence of favorable self selection.
In order to obtain a more complete picture of favorable self selection, we examined the wage effects of prospective migration for five other interval periods.