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Moral hazard, adverse selection, and health expenditures: A semiparametric analysis
Author(s) -
Bajari Patrick,
Dalton Christina,
Hong Han,
Khwaja Ahmed
Publication year - 2014
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12069
Subject(s) - adverse selection , moral hazard , actuarial science , information asymmetry , morale hazard , health care , economics , econometrics , set (abstract data type) , consumption (sociology) , health insurance , microeconomics , computer science , self insurance , incentive , sociology , economic growth , programming language , social science
Theoretical models predict asymmetric information in health insurance markets may generate inefficient outcomes due to adverse selection and moral hazard. However, previous empirical research has found it difficult to disentangle adverse selection from moral hazard in health care consumption. We propose a two‐step semiparametric estimation strategy to identify and estimate a canonical model of asymmetric information in health care markets. With this method, we can estimate a structural model of demand for health care. We illustrate this method using a claims‐level data set with confidential information from a large self‐insured employer. We find significant evidence of moral hazard and adverse selection.