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Long-Term Care Insurance: Information Frictions and Selection

Martin Boyer, Philippe De Donder (), Claude Fluet (), Marie-Louise Leroux () and Pierre-Carl Michaud ()
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Martin Boyer: HEC Montréal - HEC Montréal

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Abstract: This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against nancial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and individual cost estimates, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance. Our results are twofold. First, information frictions are pervasive. Second, measuring the welfare losses associated with frictions in a framework that also allows for selection, it is found that information frictions reduce equilibrium take-up and lead to large welfare losses while selection plays little role.

Keywords: Long-term care insurance; adverse selection; stated-preference; health; insurance (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-age, nep-dcm, nep-exp, nep-hea and nep-ias
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Published in American Economic Journal: Economic Policy, American Economic Association, 2020, 12 (3), pp.134-169. ⟨10.1257/pol.20180227⟩

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Journal Article: Long-Term Care Insurance: Information Frictions and Selection (2020) Downloads
Working Paper: Long-Term Care Insurance: Information Frictions and Selection (2019) Downloads
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DOI: 10.1257/pol.20180227

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