NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Selection in Insurance Markets: Theory and Empirics in Pictures

Liran Einav, Amy Finkelstein

NBER Working Paper No. 16723
Issued in January 2011
NBER Program(s):   AG   HC   IO   PE

We present a graphical framework for analyzing both theoretical and empirical work on selection in insurance markets. We begin by using this framework to review the “textbook” adverse selection environment and its implications for insurance allocation, social welfare, and public policy. We then discuss several important extensions to this classical treatment that are necessitated by important real world features of insurance markets and which can be easily incorporated in the basic framework. Finally, we use the same graphical approach to discuss the intuition behind recently developed empirical methods for testing for the existence of selection and examining its welfare consequences. We conclude by discussing some important issues that are not well-handled by this framework and which, perhaps not unrelatedly, have been little addressed by the existing empirical work.

download in pdf format
   (148 K)

email paper

The NBER Bulletin on Aging and Health provides summaries of publications like this.  You can sign up to receive the NBER Bulletin on Aging and Health by email.

This paper is available as PDF (148 K) or via email.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Users who downloaded this paper also downloaded these:
Einav, Finkelstein, Ryan, Schrimpf, and Cullen w16969 Selection on Moral Hazard in Health Insurance
Einav, Finkelstein, and Levin w15241 Beyond Testing: Empirical Models of Insurance Markets
Cutler, Finkelstein, and McGarry w13746 Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance
Ananat, Gruber, Levine, and Staiger w12150 Abortion and Selection
Handel w17459 Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us