Separating Moral Hazard from Adverse Selection and Learning in Automobile Insurance: Longitudinal Evidence from France
AbstractThe identification of information problems in different markets is a challenging issue in the economic literature. In this paper, we study the identification of moral hazard from adverse selection and learning within the context of a multi-period dynamic model. We extend the model of Abbring et al. (2003) to include learning and insurance coverage choice over time. We derive testable empirical implications for panel data. We then perform tests using longitudinal data from France during the period 1995-1997. We find evidence of moral hazard among a sub-group of policyholders with less driving experience (less than 15 years). Policyholders with less than 5 years of experience have a combination of learning and moral hazard, whereas no residual information problem is found for policyholders with more than 15 years of experience.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 1035.
Date of creation: 2010
Date of revision:
Moral hazard; adverse selection; learning; dynamic insurance contracting; panel data; empirical test;
Other versions of this item:
- Georges Dionne & Pierre-Carl Michaud & Maki Dahchour, 2013. "Separating Moral Hazard From Adverse Selection And Learning In Automobile Insurance: Longitudinal Evidence From France," Journal of the European Economic Association, European Economic Association, vol. 11(4), pages 897-917, 08.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
- C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-02 (All new papers)
- NEP-CTA-2010-10-02 (Contract Theory & Applications)
- NEP-IAS-2010-10-02 (Insurance Economics)
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- Dionne, Georges & Michaud, Pierre-Carl & Pinquet, Jean, 2013.
"A review of recent theoretical and empirical analyses of asymmetric information in road safety and automobile insurance,"
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- Georges Dionne & Nathalie Fombaron & Neil Doherty, 2012. "Adverse Selection in Insurance Contracting," Cahiers de recherche 1231, CIRPEE.
- Georges Dionne, 2012. "The Empirical Measure of Information Problems with Emphasis on Insurance Fraud and Dynamic Data," Cahiers de recherche 1233, CIRPEE.
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