Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Real Effects of the Uninsured on Premia

Contents:

Author Info

  • Yannelis, Constantine
  • Sun, Stephen Teng

Abstract

In some insurance markets, the uninsured can generate a negative externality on the insured, leading insurance companies to pass on costs as higher premia. Using a novel panel data set and a staggered policy change that exogenously varied the rate of uninsured drivers at the county level in California, we quantitatively investigate the effect of uninsured motorists on automobile insurance premia. Consistent with predictions of theory, we find uninsured drivers lead to higher insurance premia. Specifically, a 1 percentage point increase in the rate of uninsured drivers raises insurance premia by between 1-2%. We also discuss corrective Pigouvian taxes.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://mpra.ub.uni-muenchen.de/48264/
File Function: original version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/49736/
File Function: revised version
Download Restriction: no

File URL: http://mpra.ub.uni-muenchen.de/50087/
File Function: revised version
Download Restriction: no

Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 48264.

as in new window
Length:
Date of creation: 20 May 2013
Date of revision:
Handle: RePEc:pra:mprapa:48264

Contact details of provider:
Postal: Schackstr. 4, D-80539 Munich, Germany
Phone: +49-(0)89-2180-2219
Fax: +49-(0)89-2180-3900
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC

Related research

Keywords: Insurance; externality; uninsured; Pigouvian tax;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
  2. Smith, Eric & Wright, Randall, 1992. "Why Is Automobile Insurance in Philadelphia So Damn Expensive?," American Economic Review, American Economic Association, American Economic Association, vol. 82(4), pages 756-72, September.
  3. Mankiw, N. Gregory, 2009. "Smart Taxes: An Open Invitation to Join the Pigou Club," Scholarly Articles 4263740, Harvard University Department of Economics.
  4. Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
  5. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, American Economic Association, vol. 69(5), pages 880-91, December.
  6. Aaron S. Edlin & Pinar Karaca-Mandic, 2004. "The Accident Externality from Driving," Public Economics, EconWPA 0401003, EconWPA.
  7. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
  8. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 480-93, June.
  9. Jonathan Gruber, 2008. "Covering the Uninsured in the United States," Journal of Economic Literature, American Economic Association, vol. 46(3), pages 571-606, September.
  10. Cohen, Alma & Dehejia, Rajeev, 2004. "The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 47(2), pages 357-93, October.
  11. Raj Chetty, 2005. "A General Formula for the Optimal Level of Social Insurance," NBER Working Papers 11386, National Bureau of Economic Research, Inc.
  12. Dahlby, Bev & West, Douglas S, 1986. "Price Dispersion in an Automobile Insurance Market," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(2), pages 418-38, April.
  13. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 541-62, November.
  14. Liran Einav & Amy Finkelstein & Mark R. Cullen, 2010. "Estimating Welfare in Insurance Markets Using Variation in Prices," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 125(3), pages 877-921, August.
  15. Khazzoom, J. Daniel, 1999. "What We Know About Uninsured Motorists and How Well We Know What We Know," Discussion Papers, Resources For the Future dp-98-09-rev, Resources For the Future.
  16. Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," Discussion Papers, Stanford Institute for Economic Policy Research 04-031, Stanford Institute for Economic Policy Research.
  17. Alma Cohen, 2005. "Asymmetric Information and Learning: Evidence from the Automobile Insurance Market," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 197-207, May.
  18. Parry, Ian W.H. & Walls, Margaret & Harrington, Winston, 2007. "Automobile Externalities and Policies," Discussion Papers, Resources For the Future dp-06-26, Resources For the Future.
  19. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 213.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:48264. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.