Working Paper: NBER ID: w15241
Authors: Liran Einav; Amy Finkelstein; Jonathan Levin
Abstract: We describe recent advances in the empirical analysis of insurance markets. This new research proposes ways to estimate individual demand for insurance and the relationship between prices and insurer costs in the presence of adverse and advantageous selection. We discuss how these models permit the measurement of welfare distortions arising from asymmetric information and the welfare consequences of potential government policy responses. We also discuss some challenges in modeling imperfect competition between insurers, and outline a series of open research questions.
Keywords: insurance markets; asymmetric information; adverse selection; government policy; welfare analysis
JEL Codes: C51; D82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| asymmetric information in insurance markets (D82) | adverse selection (D82) |
| adverse selection (D82) | high-risk individuals self-selecting into more generous coverage (G52) |
| higher coverage (G52) | higher claim rates (G22) |
| asymmetric information (D82) | welfare distortions (D69) |
| government interventions (H53) | welfare outcomes (I38) |
| structure of insurance contracts (G22) | consumer behavior (D19) |