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Moral Hazard, Adverse Selection and Health Expenditures: A Semiparametric Analysis

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  • Patrick Bajari
  • Han Hong
  • Ahmed Khwaja
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Abstract

Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care. We empirically study this question by using data from the Health and Retirement Study to estimate a structural model of the demand for health insurance and medical care. Using a two-step semi-parametric estimation strategy we find significant evidence of moral hazard, but not of adverse selection.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12445.

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Date of creation: Aug 2006
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Handle: RePEc:nbr:nberwo:12445

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