Working Paper: NBER ID: w21048
Authors: Daniel Gottlieb; Olivia S. Mitchell
Abstract: We propose a model of narrow framing in insurance and test it using data from a new module we designed and fielded in the Health and Retirement Study. We show that respondents subject to narrow framing are substantially less likely to buy long-term care insurance than average. This effect is distinct from, and much larger than, the effects of risk aversion or adverse selection, and it offers a new explanation for why people underinsure their later-life care needs.
Keywords: narrow framing; long-term care insurance; behavioral economics
JEL Codes: D03; G22; I13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| narrow framing (D91) | lower likelihood of purchasing LTCI (G52) |
| narrow framing (D91) | lower demand for LTCI (G52) |
| risk aversion (D81) | LTCI purchase behavior (G52) |
| adverse selection (D82) | LTCI purchase behavior (G52) |