Heterogeneity, demand for insurance and adverse selection

Johannes Spinnewijn

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 desir- ability of policies like insurance subsidies and mandates, commonly used to tackle adverse selection.

Keywords: Heterogeneity; adverse selection; demand frictions; insurance market interventions (search for similar items in EconPapers)
JEL-codes: D11 D81 D82 G22 G28 (search for similar items in EconPapers)
Date: 2017-02-01
New Economics Papers: this item is included in nep-ias
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Published in American Economic Journal: Economic Policy, 1, February, 2017, 9(1), pp. 308-343. ISSN: 1945-7731

Downloads: (external link)
http://eprints.lse.ac.uk/66511/ Open access version. (application/pdf)

Related works:
Journal Article: 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)
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:ehl:lserod:66511

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().