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Moral hazard, adverse selection, and health expenditures: A semiparametric analysis

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  • Patrick Bajari
  • Christina Dalton
  • Han Hong
  • Ahmed Khwaja

Abstract

type="main"> 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 consumption. We propose a two-step semiparametric estimation strategy to identify and estimate a canonical model of asymmetric information in health care markets. With this method, we can estimate a structural model of demand for health care. We illustrate this method using a claims-level data set with confidential information from a large self-insured employer. We find significant evidence of moral hazard and adverse selection.

Suggested Citation

  • Patrick Bajari & Christina Dalton & Han Hong & Ahmed Khwaja, 2014. "Moral hazard, adverse selection, and health expenditures: A semiparametric analysis," RAND Journal of Economics, RAND Corporation, vol. 45(4), pages 747-763, December.
  • Handle: RePEc:bla:randje:v:45:y:2014:i:4:p:747-763
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12069
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    References listed on IDEAS

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    Cited by:

    1. Liran Einav & Amy Finkelstein & Stephen P. Ryan & Paul Schrimpf & Mark R. Cullen, 2013. "Selection on Moral Hazard in Health Insurance," American Economic Review, American Economic Association, pages 178-219.
    2. Keane, Michael & Stavrunova, Olena, 2016. "Adverse selection, moral hazard and the demand for Medigap insurance," Journal of Econometrics, Elsevier, pages 62-78.
    3. Mariacristina De Nardi & Eric French & John Bailey Jones, 2016. "Medicaid Insurance in Old Age," American Economic Review, American Economic Association, pages 3480-3520.
    4. Juan Pablo Atal & Hanming Fang & Martin Karlsson & Nicolas R. Ziebarth, 2017. "Exit, Voice or Loyalty? An Investigation into Mandated Portability of Front-Loaded Private Health Plans," NBER Working Papers 23468, National Bureau of Economic Research, Inc.
    5. Mercy Raquel Orellana Bravo & Juan Andrés Piedra Peña & Luis Santiago Sarmiento Moscoso, 2017. "Evidence About The Moral Hazard In The Ecuadorian Health System," Journal of Smart Economic Growth, , vol. 2(1), pages 109-132, March.
    6. Haizhen Lin & Daniel W. Sacks, 2016. "Intertemporal Substitution in Health Care Demand: Evidence from the RAND Health Insurance Experiment," NBER Working Papers 22802, National Bureau of Economic Research, Inc.
    7. Randall P. Ellis & Wenjia Zhu, 2015. "Health Plan Type Variations in Spells of Health Care Treatment," Boston University - Department of Economics - Working Papers Series wp2015-022, Boston University - Department of Economics.
    8. David Powell & Dana Goldman, 2016. "Disentangling Moral Hazard and Adverse Selection in Private Health Insurance," NBER Working Papers 21858, National Bureau of Economic Research, Inc.
    9. Keane, Michael & Stavrunova, Olena, 2016. "Adverse selection, moral hazard and the demand for Medigap insurance," Journal of Econometrics, Elsevier, vol. 190(1), pages 62-78.

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