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Beyond Testing: Empirical Models of Insurance Markets

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  • 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.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15241.

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Date of creation: Aug 2009
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Publication status: published as Liran Einav & Amy Finkelstein & Jonathan Levin, 2010. "Beyond Testing: Empirical Models of Insurance Markets," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 311-336, 09.
Handle: RePEc:nbr:nberwo:15241

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  19. Hemenway, David, 1990. "Propitious Selection," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(4), pages 1063-69, November.
  20. Mark Cullen & Liran Einav & Amy Finkelstein, 2008. "Estimating Welfare in Insurance Markets Using Variation in Prices," Discussion Papers, Stanford Institute for Economic Policy Research 08-006, Stanford Institute for Economic Policy Research.
  21. Jeffrey R. Brown & Amy Finkelstein, 2008. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 1083-1102, June.
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  32. Roozbeh Hosseini, 2008. "Adverse Selection in the Annuity Market and the Role for Social Security," 2008 Meeting Papers 264, Society for Economic Dynamics.
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  34. Amy Finkelstein & James Poterba, 2006. "Testing for Asymmetric Information Using 'Unused Observables' in Insurance Markets: Evidence from the U.K. Annuity Market," NBER Working Papers 12112, National Bureau of Economic Research, Inc.
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