The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands

Benjamin R. Handel, Jonathan Kolstad, Thomas Minten and Johannes Spinnewijn

No 27785, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Market provision of impure public goods such as insurance retirement savings and education is common and growing as policy makers seek to offer more choice and gain efficiencies. This approach induces an important trade-off between improved surplus from matching individuals to products and misallocation due to well documented choice errors in these markets. We study this trade-off in the health insurance market in the Netherlands, with a specific focus on misallocation and inequality. We characterize choice quality as a function of predicted health risk and leverage rich administrative data to study how it depends on individual human capital, socioeconomic status and social and information networks. We find that choice quality is low on average, with many people foregoing options that deliver substantive value. We also find a strong choice quality gradient with respect to key socioeconomic variables. Individuals with higher education levels and more analytic degrees or professions make markedly better decisions. Social influence on choices further increases inequality in decision making. Using panel variation in exposure to peers we find strong within firm, location and family impacts on choice quality. Finally, we use our estimates to model the consumer surplus effects of different counterfactual scenarios. While smart default policies could improve welfare substantially, including the choice of a high-deductible option delivers little welfare gain, especially for low-income individuals who make lower quality choices and are in worse health.

JEL-codes: D91 H42 I13 I14 (search for similar items in EconPapers)
Date: 2020-09
New Economics Papers: this item is included in nep-eur, nep-hea and nep-ias
Note: EH IO PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.nber.org/papers/w27785.pdf (application/pdf)

Related works:
Working Paper: The social determinants of choice quality: evidence from health insurance in the Netherlands (2020)
Working Paper: The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands (2020)
Working Paper: The social determinants of choice quality: evidence from health insurance in the Netherlands (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:27785

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w27785

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().