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Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces

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  • Naoki Aizawa
  • You Suk Kim

Abstract

This paper studies government and private advertising in market-based public programs. In a model of advertising, we first examine when government advertising increases welfare. Then, we estimate the effects of advertising on consumer demand and assess their welfare effects in the Affordable Care Act health insurance marketplaces. We find government advertising increases overall enrollment and enhances welfare. By contrast, the market expansion effect of private advertising is modest at most. Although private advertising increases demand for insurers in certain specifications, it is not a very efficient tool to induce consumers to select insurers with better plans due to rent-seeking competition.

Suggested Citation

  • Naoki Aizawa & You Suk Kim, 2025. "Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces," American Economic Journal: Economic Policy, American Economic Association, vol. 17(2), pages 84-121, May.
    • Handle: RePEc:aea:aejpol:v:17:y:2025:i:2:p:84-121
    DOI: 10.1257/pol.20220352
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    References listed on IDEAS

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    1. Kate Ho & Robin S. Lee, 2019. "Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets," American Economic Review, American Economic Association, vol. 109(2), pages 473-522, February.
    2. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
    3. Naoki Aizawa & You Suk Kim, 2018. "Advertising and Risk Selection in Health Insurance Markets," American Economic Review, American Economic Association, vol. 108(3), pages 828-867, March.
    4. Mark Shepard, 2022. "Hospital Network Competition and Adverse Selection: Evidence from the Massachusetts Health Insurance Exchange," American Economic Review, American Economic Association, vol. 112(2), pages 578-615, February.
    5. Francesco Decarolis & Maria Polyakova & Stephen P. Ryan, 2020. "Subsidy Design in Privately Provided Social Insurance: Lessons from Medicare Part D," Journal of Political Economy, University of Chicago Press, vol. 128(5), pages 1712-1752.
    6. Maria Polyakova & Stephen P. Ryan, 2019. "Subsidy Targeting with Market Power," NBER Working Papers 26367, National Bureau of Economic Research, Inc.
    7. Benjamin R. Handel, 2013. "Adverse Selection and Inertia in Health Insurance Markets: When Nudging Hurts," American Economic Review, American Economic Association, vol. 103(7), pages 2643-2682, December.
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    More about this item

    JEL classification:

    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G52 - Financial Economics - - Household Finance - - - Insurance
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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