is protectionism on the rise assessing national trade policies during the crisis of 2008 to understand the role of trade policies in the crisis of 2008 this paper constructs the overall trade restrictiveness indices for a wide range of countries using their tariff schedules in 2008 and 2009 the index summarizes the trade policy stance of a country taking into account the share of each good in trade as well as its corresponding import demand elasticity results show that there is no widespread increase in protectionism via tariff policies since the global financial crisis has unfolded while many countries have adjusted tariffs upward on selected products only a handful of countries such as malawi russia argentina turkey and china focus on products that have significant impacts on trade flows the united states and the european union by contrast rely mainly on anti dumping duties to shield domestic industries overall while the rise in tariffs and anti dumping duties in these countries may have jointly caused global trade to drop by as much as us 43 billion during the crisis period it explains less than 2 percent of the collapse in world trade

the origins of ethnolinguistic diversity this study explores the determinants of ethnolinguistic diversity within as well as across countries shedding light on its geographic origins the empirical analysis conducted across countries virtual countries and pairs of contiguous regions establishes that geographic variability captured by variation in regional land quality and elevation is a fundamental determinant of contemporary linguistic diversity the findings are consistent with the proposed hypothesis that differences in land endowments gave rise to location specific human capital leading to the formation of localized ethnicities jel j15 j24 z13

the political economy of linguistic cleavages article i nfo this paper uses a linguistic tree describing the genealogical relationship between all 6912 world languages to compute measures of diversity at different levels of linguistic aggregation by doing so we let the data inform us on which linguistic cleavages are most relevant for a range of political economy outcomes rather than making ad hoc choices we find that deep cleavages originating thousands of years ago lead to better predictors of civil conflict and redistribution the opposite pattern emerges when it comes to the impact of linguistic diversity on growth and public goods provision where finer distinctions between languages matter 2011 elsevier b v all rights reserved

a political economy theory of trade agreements we develop a model where trade agreements in addition to correcting terms of trade externalities help governments to commit vis a vis domestic industrial lobbies the model allows us to explore how the characteristics of the political environment aect the structure of the trade agreement and the extent of trade liberalization the model also highlights the role of intersectoral capital mobility in determining trade liberalization in a dynamic extension of the model we explore the extent to which trade liberalization occurs gradually and how its speed depends on the fundamentals of the problem

evolving choice inconsistencies in choice of prescription drug insurance we study choice over prescription insurance plans by the elderly using government administrative data to evaluate how these choices evolve over time we find large foregone savings from not choosing the lowest cost plan that has grown over time we develop a structural framework to decompose the changes in foregone welfare from inconsistent choices into choice set changes and choice function changes from a fixed choice set we find that foregone welfare increases over time due primarily to changes in plan characteristics such as premiums and out of pocket costs we estimate little learning at either the individual or cohort level

the logic of political violence this paper offers a unified approach for studying political violence whether it emerges as repression or civil war we formulate a model where an incumbent or opposition can use violence to maintain or acquire power to study which political and economic factors drive one sided or two sided violence repression or civil war the model predicts a hierarchy of violence states from peace via repression to civil war and suggests a natural empirical approach exploiting only within country variation in the data we show that violence is associated with shocks that can affect wages and aid as in the theory these effects are only present where political institutions are non cohesive

what makes growth sustained abstract we identify structural breaks in economic growth in 140 countries and use these to define growth spells periods of high growth preceded by an upbreak and ending either with a downbreak or with the end of the sample growth spells tend to be shorter in african and latin american countries than elsewhere we find evidence that growth duration is positively related to the degree of equality of the income distribution democratic institutions export orientation with higher propensities to export manufactures greater openness to fdi and avoidance of exchange rate overvaluation favorable for duration and macroeconomic stability

the value of trade agreements in the presence of political pressures an argument often heard in favor of trade agreements is that by committing to free trade a government can credibly distance itself from domestic lobbies but several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process we develop a small country model in which factors are sector specific in the short run but mobile in the long run we show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade and hence it may value a trade agreement

policy choice theory and evidence from commitment via international trade agreements abstract why do governments employ inefficient policies when more efficient ones are available for the same purpose we address this puzzle in the context of redistribution toward special interest groups sigs by focusing on a set of important policies tariffs and non tariff barriers ntbs in our policy choice model a government can gain by committing to constrain tariffs through international agreements even if this leads to the use of less efficient ntbs commitment has political value because it improves the bargaining position of a government that is weak relative to domestic sigs using detailed data we find support for several of the model s predictions including i tariff commitments in trade agreements increase the likelihood and restrictiveness of ntbs but not enough to offset the original tariff reductions ii tariff commitments are more likely to be adopted and more stringent when the government is weaker relative to a sig thus the results can explain the use of inefficient policies for redistribution and suggest that the bargaining motive is an important source of the political value of commitment in international agreements

self enforcing trade agreements evidence from time varying trade policy the bagwell and staiger 1990 theory of cooperative trade agreements predicts new tariffs i increase with imports ii increase with the inverse of the sum of the import demand and export supply elasticities and iii decrease with the variance of imports the authors find us import policy during 1997 2006 to be consistent with this theory a one standard deviation increase in import growth the inverse of the sum of the import demand and export supply elasticity and the standard deviation of import growth changes the probability that the us imposes an antidumping tariff by 35 percent by 88 percent and by 76 percent respectively

resistance to reform status quo bias in the presence of individual specific uncertainty comment why do governments so often fail to adopt policies which economists consider to be efficiency enhancing our answer to this question relies on uncertainty regarding the distribution of gains and losses from reform we show that there is a bias towards the status quo and hence against efficiency enhancing reforms whenever some of the individual gainers and losers from reform cannot be identified beforehand there are reforms which once adopted will receive adequate political support but would have failed to carry the day ex ante the argument does not rely on risk aversion irrationality or hysteresis due to sunk costs jel d72 f13 why do governments so often fail to adopt policies that economists consider to be efficiency enhancing this is one of the fundamental questions of political economy the answer usually relies on what may be

how do countries respond to anti dumping filings dispute settlement and retaliatory anti dumping empirical studies have found that countries may respond strategically to the antidumping petitions filed against their exporters through their own retaliatory actions although most previous studies have focused on retaliatory antidumping filings in this paper we explore another potential avenue for strategic response filing a complaint under the world trade organization s wto dispute settlement understanding using a panel of global antidumping filings between 1995 and 2011 we analyze under what conditions countries will choose to retaliate through either an antidumping petition or a wto dispute and to what degree these two strategies are complementary or act as substitutes we find statistical evidence that countries are more likely to file a wto dispute when they have also filed retaliatory antidumping petition suggesting that these two strategies may be complementary jel classification f13

macroeconomic factors and antidumping filings evidence from four countries abstract this paper examines the relationship between antidumping filings and macroeconomic factors real exchange rate fluctuations affect the two criteria for dumping in opposite ways making the overall effect on filings ambiguous in theory examining the filing patterns of the four major users of ad law during the 1980 98 period we find that real exchange rates and domestic real gdp growth both have statistically significant impacts on filings bilateral filing data indicate that a one standard deviation real appreciation of the domestic currency increases filings by 33 we also find one standard deviation fall in domestic real gdp increases filings by 23

comparison friction experimental evidence from medicare drug plans consumers need information to compare alternatives for markets to function efficiently recognizing this public policies often pair competition with easy access to comparative information the implicit assumption is that comparison friction the wedge between the availability of comparative information and consumers use of it is inconsequential because information is readily available and consumers will access this information and make effective choices we examine the extent of comparison friction in the market for medicare part d prescription drug plans in the united states in a randomized field experiment an intervention group received a letter with personalized cost information that information was readily available for free and widely advertised however this additional step providing the information rather than having consumers actively access it had an impact plan switching was 28 percent in the intervention group versus 17 percent in the comparison group and the intervention caused an average decline in predicted consumer cost of about 100 per year among letter recipients roughly 5 percent of the cost in the comparison group our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

fiscal conservatism as a response to the debt crisis abstract in this paper we develop a model in which social conflict and adjustment costs induce delayed inflation stabilization we show that the longer this delay is the less demanding are the conditions that some groups will accept in order to stabilize in the context of the latin american debt crisis our model gives a rationale for the time lag between the outset of the crisis and the implementation of reform programs as well as for the strongly conservative nature of those that are currently being implemented

fragile states and development policy it is widely recognized that fragile states are key symptoms of under development in many parts of the world such states are incapable of delivering basic services to their citizens and political violence is commonplace as of yet mainstream development economics has not dealt in any systematic way with such concerns and the implications for development assistance this paper puts forward a framework for analyzing fragile states and applies it to a variety development policies in different types of states

holding on ethnic divisions political institutions and the duration of economic declines abstract we analyze the duration of large economic declines and provide a theory of delayed recovery we show theoretically that uncertain post recovery incomes lead to a commitment problem which limits the possibility of cooperation in ethnically heterogeneous countries strong constraints on the executive solve this problem by reducing the uncertainty associated with cooperative behavior we test the model using standard data on linguistic heterogeneity and detailed data on ethnic power configurations our findings support the central theoretical prediction countries with more constrained political executives experience shorter economic declines the effect is large in ethnically heterogeneous countries but virtually non existent in homogeneous societies our main results are robust to a variety of perturbations regarding the estimation method the estimation sample measures of heterogeneity and measures of institutions

trade policy flexibilities and turkey tariffs antidumping safeguards and wto dispute settlement trade policy commitments to lower import tariffs and to maintain tariffs at low levels entail short and long run political economic costs and benefits empirical work examining the relationship between such commitments and the exercise of trade policy flexibilities is still relatively nascent especially for emerging economies this paper provides a rich empirically based assessment of ways that turkey exercised trade policy flexibilities during the global economic crisis of 2008 11 first and despite multilateral and customs union commitments that might limit changes to applied tariffs turkey made changes to both its applied most favored nation and preferential tariffs that cumulatively affect nearly 9 percent of manufacturing imports and 10 percent of import product lines second turkey s cumulative application of temporary trade barrier ttb policies antidumping safeguards and countervailing duties are estimated to impact by 2011 an additional 4 percent of imports and 6 percent of product lines other surprising results on turkey s use of flexibilities include extending the duration of previously imposed antidumping and safeguards beyond expected removal dates removing one ttb policy over a set of products and immediately reapplying a different ttb policy covering lengthy upstream and downstream segments of important industries and deepening discriminatory preference margins already inherent in existing preferential trade agreements

import protection business cycles and exchange rates evidence from the great recession this research estimates the impact of macroeconomic fluctuations on import protection policies over 1988 q1 2010 q4 for five industrialized economies the united states european union australia canada and south korea there is evidence of a strong countercyclical trade policy response in the pre great recession period of 1988 q1 2008 q3 during which increases in domestic unemployment rates real appreciations in bilateral exchange rates and declines in the gdp growth rates of bilateral trading partners led to substantial increases in new temporary trade barriers it then applies this pre great recession empirical model to realized macroeconomic data from 2008 q4 2010 q4 and find it predicts a surge of new import protection during the great recession e g for the us and eu the model predicts new trade barriers would cover an additional 15 percentage points of nonoil imports well above the baseline level of 2 3 percent of import coverage immediately preceding the crisis finally the research examines why the realized trade policy response differed from model predictions while exchange rate movements played an important role in limiting new import protection during the great recession there is also evidence of one particularly important change in trade policy responsiveness i e in this period governments refrained from imposing new temporary trade barriers against foreign trading partners experiencing their own weak or negative economic growth

commercial policy variability bindings and market access abstract protection unconstrained by rules often varies substantially over time rules based disciplines such as wto tariff bindings and bindings on market access in services constrain this variability we examine the theoretical effects of such constraints on the expected cost of protection and offer a formalization of the concept of market access emphasizing both the first and second moments of the distribution of protection as an illustration we provide a stylized examination of uruguay round bindings on wheat

the value of democracy evidence from road building in kenya ethnic favoritism is seen as antithetical to development this paper provides credible quantification of the extent of ethnic favoritism using data on road building in kenyan districts across the 1963 2011 period guided by a model it then examines whether the transition in and out of democracy under the same president constrains or exacerbates ethnic favoritism across the post independence period we find strong evidence of ethnic favoritism districts that share the ethnicity of the president receive twice as much expenditure on roads and have five times the length of paved roads built this favoritism disappears during periods of democracy jel d72 h54 j15 o15 o17 o22 r42

prescription drug use under medicare part d a linear model of nonlinear budget sets abstract medicare part d enrollees face a complicated decision they dynamically choose prescription drug consumption in each period given difficult to find prices and a nonlinear budget set we use part d claims data to estimate a flexible model of consumption that accounts for nonlinear prices dynamic responses and salience we use reduced form price responses from a linear regression of consumption on coverage range prices to compare performance under several models of behavior we find small price elasticities substantial myopia and that salient characteristics impact consumption beyond their effect on prices a hyperbolic discounting model with salience fits the data best

sinking swimming or learning to swim in medicare part d under medicare part d senior citizens choose prescription drug insurance offered by numerous private insurers we examine nonpoor enrollees actions in 2006 and 2007 using panel data our sample reduced overspending by 298 on average with gains by 81 percent of them the greatest improvements were by those who overspent most in 2006 and by those who switched plans decisions to switch depended on individuals overspending in 2006 and on individualspecific effects of changes in their current plans the oldest consumers and those initiating medications for alzheimer s disease improved by more than average suggesting that real world institutions help overcome cognitive limitations

ethnicity and conflict an empirical study this paper examines the impact of ethnic divisions on conict the empirical specication is informed by a theoretical model of conict esteban and ray 2011 in which equilibrium conict is related to just three distributional indices of diversity ethnic polarization ethnic fractionalization and a greenberg gini index constructed across ethnic groups our empirical ndings verify that these distributional measures are signicant correlates of conict the underlying theory permits us to use these results to make inferences about the relative importance of public goods in conict as well as the extent of within group cohesion in conictual activity these eects are further strengthened as we introduce country specic measures of group cohesion and the relative importance of public goods and combine them with the distributional measures exactly as specied by the theory

ethnicity and development in africa a reappraisal 131 enroll while membership is an entitlement that can be activated the entitlement is restricted by family membership as in other developing regions formal institutions are weak in modern africa and persons therefore tend to organize economic relationships through social institutions one way of augmenting the stock of capital is through education another is through migration to the city to a great degree it is families who organize the flow of resources that promote both urban migration and the acquisition of skills recognizing the central role of families in the formation of capital one can achieve a better grasp of the relationship between modernization and ethnicity to a significant degree modernization is achieved through the process of human capital formation this process is privately organized that is to say it is organized by families families organize the flow of resources between generations and sectors thus promoting the acquisition of skills and urban migration and thus the modernization of societies it is by stabilizing the contract between generations within family units that ethnic groups facilitate the process of investment to illustrate i use data collected from a village in luapula province zambia which supplies labor to the mining centers of zambia and congo when conducting my field work i focused on links between town and country and found that the income rural dwellers derived from town varied systematically with the structure size age composition and education of their families the coefficients in the remittance function suggested that an additional child yields on average 3 23 kwacha in the form of financial those who study modern africa commonly highlight three features its poverty its instability and its ethnic diversity whether in lurid popularizations e g robert kaplan 1994 or in social scientific research e g william easterly and ross levine 1997 but see also paul collier and a hoeffler 1998 scholars reason that africa is poor because it is unstable and that its instability derives from its ethnic complexity ethnicity thus lies it is held at the root of africa s development crisis this essay critiques the conventional wisdom by mounting an alternative interpretation using both qualitative and quantitative data from africa this article argues that

taking stock of antidumping safeguards and countervailing duties 1990 2009 antidumping safeguards countervailing duties 1990 2009 this article examines the evolving cross country use of antidumping safeguard and countervailing duty policies temporary trade barriers ttbs over the period 1990 2009 i construct two new measures of imported products subject to the combined use of these ttbs before applying these measures to new data drawn from the world bank s temporary trade barriers database i then establish a number of facts regarding trends in historical use to benchmark against policy activity during the global economic crisis of 2008 09 the 2008 09 economic shock mostly accentuates patterns and trends already visible in the precrisis data e g while the major users of such policies overall combined to increase the product lines subject to ttbs by 25 per cent during the crisis this was driven almost entirely by developing economies which increased their product coverage by 40 per cent perhaps surprisingly recession affected high income economies increased their stock of product coverage by only 5 per cent during the crisis a muted policy response consistent with earlier trends in which major developed economies like the united states and eu reduced the stock of imported products they subject to ttbs to 2007 levels that were only 50 per cent as high as their within period peak furthermore a previously unidentified feature of the data is that a much larger share of china s exported products to other developing economies is subject to foreign imposed antidumping than its exports to developed economies the evidence confirms this feature is shared by a number of other major developing economy exporters deepening concern that these discriminatory trade barriers are increasingly a south south phenomenon finally i also clarify emerging trends in countervailing duty anti subsidy use across countries

cascading contingent protection abstract this paper extends the literature on the incentive effects of contingent protection by identifying and analyzing the vertical linkages that may exist across instances of contingent trade policy it is shown that the accessibility of contingent protection in a downstream industry may provide additional inducement for upstream suppliers of intermediate inputs to pursue contingent protection as well in general access to instruments of contingent protection at more than one stage of the production stream enhances the opportunity for components producers to engage in indirect rent seeking contingent protection may be pursued precisely because of the likelihood of downstream injury and cascading protection

paying attention or paying too much in medicare part d we study whether people became less likely to switch medicare prescription drug plans pdps due to more options and more time in part d panel data for a random 20 percent sample of enrollees from 2006 2010 show that 50 percent were not in their original pdps by 2010 individuals switched pdps in response to higher costs of their status quo plans saving them money contrary to choice overload larger choice sets increased switching unless the additional plans were relatively expensive neither switching overall nor responsiveness to costs declined over time and above minimum spending in 2010 remained below the 2006 and 2007 levels

tariff binding and overhang theory and evidence abstract most market access commitments under the wto are in the form of bindings on applied tariff rates we observe two important regularities in the data first applied tariffs are often lower than the bound tariffs providing governments with substantial policy flexibility second the extent of flexibility varies substantially across sectors and countries in a sharp contrast to the prediction of standard trade agreement models we observe a strong negative correlation between tariff commitments and measures of import market power we model the trade off between discipline and flexibility in the design of trade agreements and argue that recognizing this trade off is the key to explain the observed patterns in the tariff binding commitments and applied tariffs under the wto

ask your doctor direct to consumer advertising of pharmaceuticals we measure the impact of direct to consumer television advertising dtca by drug manufacturers our identification strategy exploits shocks to local advertising markets generated by the political advertising cycle and a regulatory intervention affecting a single product we find evidence of significant business stealing effects among branded advertised drugs in addition we show positive spillovers from drug advertisements to non advertised competitors in the same class we decompose the effect and show it is primarily due to new customers finally we provide evidence that dtca is cost effective from a societal standpoint in our setting

what happens when the insurer can say no assessing prior authorization as a tool to prevent high risk prescriptions and to lower costs abstract insurers are increasingly requiring physicians to obtain prior authorization before prescribing drugs that are costly or have high abuse potential these prior authorization requirements have the potential to reduce risky prescriptions and to lower prescription drug costs but little is known about their ability to do either this study estimates the effect of a prior authorization requirement for certain costly and abuse prone drugs on prescription drug use and costs for work related injuries in texas the findings indicate that the prior authorization requirement reduces the likelihood that claimants receive non preferred drugs as well as insurers spending on non preferred drugs while there is some substitution to preferred drugs i do not find evidence of large increases in spending on preferred drugs the estimated effects on average total pharmacy spending are imprecise though there is suggestive evidence that the prior authorization requirement reduces the likelihood that a claim has high prescription drug costs the results provide strong evidence that the prior authorization requirement drastically reduces the likelihood that patients receive combinations of drugs that have contributed disproportionately to the rise in prescription drug overdoses despite the success of prior authorization in lowering spending on non preferred drugs and in reducing high risk prescriptions i find little evidence that prior authorization has disproportionately large effects on the most dangerous prescription drug use and only weak suggestive evidence that it has larger effects on prescription drug use that likely arises because physicians are not fully informed suggesting that prior authorization requirements do not necessarily target the riskiest drug use

turkey trade policy review he trade policy review turkey 2003 the third of its kind provides a comprehensive survey of trade policy developments and practices in turkey this paper discusses besides the principal issues highlighted in the report an issue that has largely been neglected in trade policy reviews it is the sustainability of current account section 2 describes the main developments in turkey s trade regime and trade performance and section 3 examines the trade policy under the headings of measures affecting imports exports and foreign direct investment section 4 is on liberalisation of services and section 5 on sustainability of current account the final section offers conclusions

taking stock of antidumping safeguards and countervailing duties 1990 2009 this article examines the evolving cross country use of antidumping safeguard and countervailing duty policies temporary trade barriers ttbs over the period 1990 2009 i construct two new measures of imported products subject to the combined use of these ttbs before applying these measures to new data drawn from the world bank s temporary trade barriers database i then establish a number of facts regarding trends in historical use to benchmark against policy activity during the global economic crisis of 2008 09 the 2008 09 economic shock mostly accentuates patterns and trends already visible in the precrisis data e g while the major users of such policies overall combined to increase the product lines subject to ttbs by 25 per cent during the crisis this was driven almost entirely by developing economies which increased their product coverage by 40 per cent perhaps surprisingly recession affected high income economies increased their stock of product coverage by only 5 per cent during the crisis a muted policy response consistent with earlier trends in which major developed economies like the united states and eu reduced the stock of imported products they subject to ttbs to 2007 levels that were only 50 per cent as high as their within period peak furthermore a previously unidentified feature of the data is that a much larger share of china s exported products to other developing economies is subject to foreign imposed antidumping than its exports to developed economies the evidence confirms this feature is shared by a number of other major developing economy exporters deepening concern that these discriminatory trade barriers are increasingly a south south phenomenon finally i also clarify emerging trends in countervailing duty anti subsidy use across countries

do weak institutions prolong crises on the identification characteristics and duration of declines during economic slumps this paper studies periods of prolonged contractions in output per capita in a sample of 145 countries from 1950 to 2014 economic slumps are defined as abrupt interruptions of a period of growth by several regime switches slumps start with a sharp contraction along with a trend break which is followed by another switch when growth stabilizes again the paper then analyzes the correlates of these slumps focusing on the length and depth of the contraction from the beginning of the slump to its trough the results establish three new stylized facts i weak political institutions predate crises whereas political reforms tend to follow them ii the length and depth of economic declines are robustly correlated with executive constraints and ethnic heterogeneity and iii there is a robust interaction between these two variables suggesting that institutions constraining leaders are important for stabilizing growth this is particularly relevant for sub saharan africa where politics are often ethnic and decision makers are comparatively unconstrained

choice inconsistencies among the elderly evidence from plan choice in the medicare part d program we evaluate the choices of elders across their insurance options under the medicare part d prescription drug plan using a unique data set of prescription drug claims matched to information on the characteristics of choice sets we document that elders place much more weight on plan premiums than on expected out of pocket costs value plan financial characteristics beyond any impacts on their own financial expenses or risk and place almost no value on variance reducing aspects of plans partial equilibrium welfare analysis implies that welfare would have been 27 higher if patients had all chosen rationally

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

medicare part d are insurers gaming the low income subsidy design this paper shows how in medicare part d insurers gaming of the subsidy paid to low income enrollees distorts premiums and raises the program cost using plan level data from the first five years of the program i find multiple instances of pricing strategy distortions for the largest insurers instrumental variable estimates indicate that the changes in a concentration index measuring the manipulability of the subsidy can explain a large share of the premium growth observed between 2006 and 2011 removing this distortion could reduce the cost of the program without worsening consumer welfare