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An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection Problems

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  • Shinya Sugawara

    (Graduate School of Economics, University of Tokyo)

  • Yasuhiro Omori

    (Faculty of Economics, University of Tokyo)

Abstract

This paper proposes a simple econometric framework that can identify moral hazard and selection problems separately in insurance markets. Although our methodology requires behavioral assumptions on the consumer's optimization, we show that these assumptions are necessary for the separate identification of the two sources of information asymmetry. Our method is applied to the dental insurance market in the United States. In addition to standard moral hazard, we find advantageous selection, which is not detected by a conventional methodology.

Suggested Citation

  • Shinya Sugawara & Yasuhiro Omori, 2012. "An Econometric Analysis of Insurance Markets with Separate Identification for Moral Hazard and Selection Problems," CIRJE F-Series CIRJE-F-849, CIRJE, Faculty of Economics, University of Tokyo.
  • Handle: RePEc:tky:fseres:2012cf849
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