Structural Estimation of a Principal-Agent Model: Moral Hazard in Medical Insurance

Marcos Vera-Hernandez

RAND Journal of Economics, 2003, vol. 34, issue 4, 670-93

Abstract: Despite the importance of principal-agent models in the development of modern economic theory, there are few estimations of these models. I recover the estimates of a principal-agent model and obtain an approximation to the optimal contract. The results show that out-of-pocket payments follow a concave profile with respect to costs of treatment. I estimate the welfare loss due to moral hazard, taking into account income effects. I also propose a new measure of moral hazard based on the conditional correlation between contractible and noncontractible variables. Copyright 2003 by the RAND Corporation.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:34:y:2003:i:4:p:670-93

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