Heterogeneity, Demand for Insurance, and Adverse Selection

Johannes Spinnewijn

American Economic Journal: Economic Policy, 2017, vol. 9, issue 1, 308-43

Abstract: Recent evidence underlines the importance of demand frictions distorting insurance choices. Heterogeneous frictions cause the willingness to pay for insurance to be biased upward (relative to value) for those purchasing insurance, but downward for those who remain uninsured. The paper integrates this finding with standard methods for evaluating welfare in insurance markets and demonstrates how welfare conclusions regarding adversely selected markets are affected. The demand frictions framework also makes qualitatively different predictions about the desirability of policies, such as insurance subsidies and mandates, commonly used to tackle adverse selection.

JEL-codes: D11 D81 D82 G22 G28 (search for similar items in EconPapers)
Date: 2017
Note: DOI: 10.1257/pol.20140254
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Citations: View citations in EconPapers (31)

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Related works:
Working Paper: Heterogeneity, demand for insurance and adverse selection (2017)
Working Paper: Heterogeneity, Demand for Insurance and Adverse Selection (2012)
Working Paper: Heterogeneity, Demand for Insurance and Adverse Selection (2012)
Working Paper: Heterogeneity, demand for insurance and adverse selection (2012)
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