Estimating the tradeoff between risk protection and moral hazard with a nonlinear budget set model of health insurance

Amanda Kowalski

International Journal of Industrial Organization, 2015, vol. 43, issue C, 122-135

Abstract: Insurance induces a tradeoff between the welfare gains from risk protection and the welfare losses from moral hazard. Empirical work traditionally estimates each side of the tradeoff separately, potentially yielding mutually inconsistent results. I develop a nonlinear budget set model of health insurance that allows for both simultaneously. Nonlinearities in the budget set arise from deductibles, coinsurance rates, and stoplosses that alter moral hazard as well as risk protection. I illustrate the properties of my model by estimating it using data on employer sponsored health insurance from a large firm.

Keywords: Risk protection; Moral hazard; Nonlinear budget set; Health insurance (search for similar items in EconPapers)
JEL-codes: H2 I13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167718715000909
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Estimating the Tradeoff Between Risk Protection and Moral Hazard with a Nonlinear Budget Set Model of Health Insurance (2012)
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:eee:indorg:v:43:y:2015:i:c:p:122-135

DOI: 10.1016/j.ijindorg.2015.08.001

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().