moral hazard adverse selection and health expenditures a semiparametric analysis 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

how general are time preferences eliciting good specific discount rates abstract this paper tests the commonly used assumption that people apply a single discount rate to the utility from different sources of consumption using survey data from uganda with both hypothetical and incentivized choices over different goods we elicit time preferences from about 2400 subjects we reject the null of equal discount rates across goods the average person in our sample is more impatient about sugar meat and starchy plantains than about money and a list of other goods we review the assumptions to recover discount rates from experimental choices for the case of good specific discounting consistently with the theoretical framework we find convergence in discount rates across goods for two groups expected to engage in or think about arbitraging the rewards traders and individuals with large quantities of the good at home as an application we evaluate empirically the conditions under which good specific discounting could predict a low asset poverty trap

demand and supply of infrequent payments as a commitment device evidence from kenya despite extensive evidence that preferences are often time inconsistent there is only scarce evidence of willingness to pay for commitment infrequent payments for frequently provided goods and services are a common feature of many markets and they may naturally provide commitment to save for lumpy expenses multiple experiments in the kenyan dairy sector show that i farmers are willing to incur sizable costs to receive infrequent payments as a commitment device ii poor contract enforcement however limits competition among buyers in the supply of infrequent payments we then present a model of demand and supply of infrequent payments and test its additional predictions

why don t the poor save more evidence from health savings experiments using data from a field experiment in kenya we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks simply providing a safe place to keep money was sufficient to increase health savings by 66 percent adding an earmarking feature was only helpful when funds were put toward emergencies or for individuals that are frequently taxed by friends and relatives group based savings and credit schemes had very large effects

moral hazard and the demand for physician services first lessons from a french natural experiment abstract this paper presents empirical results on moral hazard in demand for medical care using a longitudinal dataset on 4578 individuals followed during two years the dataset contains two subgroups one for which a copayment rate of 10 for physician visits was introduced in 1994 and an other for which no change occurred during the period of the study this enables us to use these data as coming from a controlled natural experiment we test if the number of visits per agent was modified by this copayment rate the data reject the hypothesis for office visits but do not for home visits this suggests that there is moral hazard in demand for some physician services but also that when non monetary costs are important small changes in monetary price may not induce any major change in behavior

censored quantile instrumental variable estimates of the price elasticity of expenditure on medical care efforts to control medical care costs depend critically on how individuals respond to prices i estimate the price elasticity of expenditure on medical care using a censored quantile instrumental variable cqiv estimator cqiv allows estimates to vary across the conditional expenditure distribution relaxes traditional censored model assumptions and addresses endogeneity with an instrumental variable my instrumental variable strategy uses a family member s injury to induce variation in an individual s own price across the conditional deciles of the expenditure distribution i find elasticities that vary from 0 76 to 1 49 which are an order of magnitude larger than previous estimates

expenditure response to increases in in kind transfers evidence from the supplemental nutrition assistance program recent studies on food stamp participant households marginal propensity to spend out of food stamps versus income have had contradictory results experimental studies have found household behavior aligns with standard economic theory where households marginal propensity to spend on food out of food stamps is equivalent to cash income observational studies nd that households have a larger marginal propensity to spend out of food stamps than cash income in this study we re examine this question by estimating how an unprecedentedly large increase in food stamp benets due to the implementation of the american recovery and reinvestment act aects food at home expenditure we nd that the policy change caused households to increase food at home expenditure as well as increase households share of total expenditure allocated toward food at home expenditure we compare these results to a time period without a meaningful food stamp policy change and nd our results are unique to the arra implementation time period

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

intertemporal choice and income regularity non fungibility in the timing of income among kenyan farmers the optimal design of informal contracts in agricultural value chains depends on when farmers prefer to be paid for their output while the evidence from time preference experiments suggests a pref

estimating demand elasticities using nonlinear pricing abstract nonlinear pricing is prevalent in industries such as health care public utilities and telecommunications however this pricing scheme introduces bias into estimating elasticities for welfare analysis or policy changes i develop a local elasticity estimation method that uses nonlinear price schedules to isolate consumers expenditure choices from selection and simultaneity biases this method improves over previous approaches by using commonly available observational data and requiring only a single general monotonicity assumption using claims level data on health insurance with two nonlinearities i am able to measure two separate elasticities and find that elasticity declines from 0 26 to 0 09 by the second nonlinearity these estimates are then used to calculate moral hazard deadweight loss this method enables estimation of many policies with nonlinear pricing which previous tools could not address

how are snap benefits spent evidence from a retail panel we use a novel retail panel with more than six years of detailed transaction records to study the effect of participation in the supplemental nutrition assistance program snap on household spending we frame our approach using novel administrative data from the state of rhode island the marginal propensity to consume snap eligible food mpcf out of snap benefits is 0 5 to 0 6 the mpcf out of cash is much smaller these patterns obtain even for households for whom snap benefits are economically equivalent to cash in the sense that benefits do not cover all food spending we reject the hypothesis that households respect the fungibility of money in a semiparametric framework a model with mental accounting can match the facts

price elasticity of expenditure across health care services policymakers in countries around the world are faced with rising health care costs and are debating ways to reform health care to reduce expenditures estimates of price elasticity of expenditure are a key component for predicting expenditures under alternative policies using unique individual level data compiled from administrative records from the chilean private health insurance market i estimate the price elasticity of expenditures across a variety of health care services i find elasticities that range between zero for the most acute service appendectomy and 2 08 for the most elective psychologist visit moreover the results show that at least one third of the elasticity is explained by the number of visits the rest is explained by the intensity of each visit finally i find that high income individuals are five times more price sensitive than low income individuals and that older individuals are less price sensitive than young individuals

direct measurement of hidden labour the hidden economy suddenly appeared in economic research in 1977 and has since attracted much attention from economists the central problems are how to assess the scale and causes of this illicit phenomenon many different methods of measurement have been applied to different western countries unfortunately these methods yield extremely different size estimates they also appear to measure different things this paper reviews the methods used and makes a strong case for direct methods an example of a direct method used in the netherlands is presented the results are used to analyse the relation between hidden and regular activities

what is meant by replication and why does it encounter resistance in economics this paper discusses recent trends in the use of replications in economics we include the results of recent replication studies that have attempted to identify replication rates within the discipline these studies generally find that replication rates are relatively low we then consider obstacles to undertaking replication studies and highlight replication initiatives in psychology and political science behind which economics appears to lag

adverse selection in insurance markets policyholder evidence from the u k annuity market in this paper we investigate the importance of adverse selection in insurance markets we use a unique data set consisting of all annuity policies sold by a large u k insurance company since the early 1980s to analyze mortality differences among individuals who purchased different types of policies we find systematic relationships between ex post mortality and annuity policy characteristics such as whether the annuity will make payments to the estate in the event of an untimely death and whether the payments from the annuity rise over time these mortality patterns are consistent with the presence of asymmetric information in the annuity market we find no evidence of substantive mortality differences however across annuities of different size even though models of insurance market equilibrium with asymmetric information would predict such differences we also find that the pricing of various features of annuity contracts is consistent with the self selection patterns we find in mortality rates our results therefore suggest that selection may occur across many specific features of insurance contracts and that the absence of selection on one contract dimension does not preclude its presence on others this highlights the importance of considering the detailed features of insurance contracts when testing theoretical models of asymmetric information

private health insurance and utilization of health services in chile this paper analyses the choice of private health insurance in chile and how this relates to the utilization of health services the results show the importance of some demographics on the insurance decision particularly age gender and marital status socio economic factors such as education income employment status and zone of residence all influence the probability of purchasing private insurance the relevance of these determinants is confirmed using a simulation analysis with four representative decision makers this simulation also provides evidence of a positive selection into private insurance although this would be driven by the different criteria used to set premiums under private and public insurance schemes the potential linkage between utilization of health services and private health insurance is examined using a simultaneous two equation framework two measures of utilization are estimated outpatient health services and length of stay in hospital a number of explanatory variables s

temporal stability of time preferences abstract the preferences assumed to govern intertemporal trade offs are generally considered to be stable economic primitives though evidence on this stability is notably lacking we present evidence from a large field study conducted over two years with around 1 400 individuals using incentivized intertemporal choice experiments aggregate choice profiles and corresponding estimates of discount parameters are unchanged over the two years and individual correlations through time are high by existing standards however some individuals show signs of instability by linking experimental measures to administrative tax records we showthat identified instability is uncorrelated with both levels and changes in sociodemographic variables

family health care spending in latin america household budget data from surveys in six latin american countries 1966 75 are used to estimate income elasticities of private health care spending for ten cities in five countries the elasticity is constant at 1 5 for metropolitan other urban and rural areas of brazil it is constant at 1 17 the brazilian data also show 30 percent higher spending in small than in large cities and 50 percent higher in the countryside these results are consistent with supposing that private care is a luxury compared to public care and that more is spent on the former when the latter is not available geographic differences may be exaggerated by differences in payment mechanisms since reported out of pocket expenditure is not net of public reimbursement different components of spending such as drugs and hospitalization show very different behavior from the total

is there an intrahousehold flypaper effect evidence from a school feeding programme are public transfers targeted toward children neutralised by the household as the theory of altruism implies or is there an intrahousehold flypaper effect whereby such transfers stick to the child this paper studies the impact of a school feeding programme on child caloric intake in the philippines using a quasi experimental methodology the empirical results confirm an intrahousehold flypaper effect indeed they indicate virtually no intrahousehold reallocation of calories in response to the feeding programme in poorer households however children s gains from the programme appear to be taxed more heavily

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

does cooperative membership improve household welfare evidence from apple farmers in china this paper examines the impact of cooperative membership on farm performance indicators such as apple yields net returns and household income using cross sectional data from a survey of farmers in china an endogenous switching regression model that accounts for selection bias is employed in the analysis the empirical results reveal that cooperative membership exerts a positive and statistically significant impact on apple yields farm net returns and household income a disaggregated analysis also reveals that small scale farms tend to benefit more from cooperatives than medium and large farms

the labeling effect of a child benefit system child benefit systems exist in many countries while they show a lot of differences in terms of eligibility rules amounts involved and implementation tax deduction tax credit or direct benefit the common motivation for their existence is to increase children s welfare in the dutch child benefit system the case i focus on in this paperone of the parents usually the mother is entitled to an untaxed child benefit amount which only depends on the child s age and the number of children in the household thus child support does not depend on household income marital status or labor market status as a result child benefit is exogenous to the household given the presence of children this is in contrast with the situation in many other countries including germany france the united kingdom and the united states where government provided child support is partly means tested see jonathan bradshaw et al 1993 in the netherlands child benefit is generally a nonnegligible addition to the household income the median share of child benefit in the total net income of households with children is 8 percent on the national level expenditures on child benefits amount to 1 2 percent of gnp the use of the child benefit is completely at the discretion of the parent there are no legal requirements that a certain amount be spent on particular goods or services nor does the government provide any guidelines regarding expenditure on children a policy question that arises is to what extent children benefit from child benefits standard microeconomic demand theory allows no role for effects of the composition of income given the fungibility of income sources it is only the sum of income components that is relevant in explaining expenditure patterns thus within that framework the answer would be that the marginal propensity to consume child goods from one guilder of child benefits is no different than from one guilder of any other income source in the more general class of gametheoretic models of household behavior however the composition of household income will generally affect expenditure patterns see e g shelly j lundberg and robert a pollak 1993 and martin browning et al 1994 if fathers and mothers have different preferences and mothers have control over child benefits the effect of child benefits on expenditures will differ from the effect of other income sources lundberg et al 1997 provide empirical evidence showing that a transfer of control over child benefits from fathers to mothers in the united kingdom due to a change in legislation resulted in a significant increase in expenditures on child clothing daniela del boca and christopher j flinn 1994 have analyzed the effect of income composition on expenditure decisions of divorced mothers they find that the coefficients associated with child support and alimony income differ from those for other income in engel curves for expenditures on childspecific goods their results can be explained in terms of a noncooperative nash model in which the child support transfer decisions of the noncustodial father and the expenditure decisions of the mother are determined simultaneously in contrast to del boca and flinn s analysis in which child support is a decision variable the present paper focuses on the possible differential effect of government provided child support which is truly exogenous in this paper i analyze the effects of child benefits on expenditures by running regressions in which child benefit enters as a separate explanatory variable the enipirical analysis is based on a time series of 17 cross section consumer expenditure surveys in the netherlands covering the period 1978 through 1994 it is important to note that in a single cross section it department of economics university of groningen p o b 800 9700 av groningen the netherlands e mail p kooreman eco rug nl i am indebted to two anonymous referees for constructive comments helpful comments were also provided by rob alessie maarten allers chris bojke werner de bondt bert schoonbeek and tom wansbeek i thank vincent linderhof for organizing the data financial support was provided by the dutch organization for scientific research nwo homes project grant

agrifood industry transformation and small farmers in developing countries summary this article introduces this special issue on the rapid transformation of the agrifood industry in developing countries and its effects on small farmers we review the literature from the late 1980s to the present and find evidence first of food processing then retail transformation and mixed evidence of impacts on small farmers both inclusion particularly with resource providing contracts and exclusion sometimes from scale constraint sometimes from inadequate non land assets the special issue papers contribute to the debate by confirming the mix of cases of inclusion and exclusion the cases are main in horticulture and dairy key hopes for smallholder development

tying odysseus to the mast evidence from a commitment savings product in the philippines we designed a commitment savings product for a philippine bank and implemented it using a randomized control methodology the savings product was intended for individuals who want to commit now to restrict access to their savings and who were sophisticated enough to engage in such a mechanism we conducted a baseline survey on 1777 existing or former clients of a bank one month later we offered the commitment product to a randomly chosen subset of 710 clients 202 28 4 percent accepted the offer and opened the account in the baseline survey we asked hypothetical time discounting questions women who exhibited a lower discount rate for future relative to current trade offs and hence potentially have a preference for commitment were indeed significantly more likely to open the commitment savings account after twelve months average savings balances increased by 81 percentage points for those clients assigned to the treatment group relative to those assigned to the control group we conclude that the savings response represents a lasting change in savings and not merely a short term response to a new product

the determinants and effects of health expenditure in developed countries previous studies of international differences in health spending have been restricted to the use of relatively small samples of cross sectional data our objective here is to re examine the results of previous work using a sample of 560 pooled time series and cross section observations results confirm the importance of gdp as a determinant of health spending with an estimated income elasticity at or around unity but also suggest that oecd countries should not be regarded as a single homogeneous group the importance of some non income variables is also confirmed although the direct effect of these factors appears to be small

structural estimation of a principal agent model moral hazard in medical insurance 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

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

time consistency stationarity and time invariance a sequence of experiments documents static and dynamic preference reversals between sooner smaller and later larger rewards when the sooner reward could be immediate the theoretically motivated design permits separate identification of time consistent stationary a ndtime invariant choices at least half of the subjects are time consistent but only three quarters of them exhibit stationary choices about half of subjects with time inconsistent choices have stationary preferences these results chal lenge the view that present bias preferences are the main source of time inconsistent choices the past twenty years have seen a surge of interest in time inconsistent preferences mostly this has been motivated by psychological experiments and introspection that have suggested the existence of present bias a decision maker prefers smaller immediate reward to a larger delayed reward but when she is asked about her preferences between these two alternatives when both are equally shifted into the future her preferences are reversed although there is no inconsistency per se in her answers this behavior has been taken to suggest that when the decision maker will be asked to update her choices in the future she will generally deviate from her ex ante plans our goal in the present study is to perform a dynamic preference reversal experiment as such one is required to extend the standard framework of pref erences over temporal payments to a dated collection of such preferences this extension allows us to formally define three distinct properties stationarity im plies that ranking of temporal payments depends only on the time distance and payment distance between the alternatives time invariance assumes that the decision maker evaluates each temporal payment relative to the evaluation pe

reference dependent consumption plans we develop a rational dynamic model in which people are loss averse over changes in beliefs about present and future consumption because changes in wealth are news about future consumption preferences over money are reference dependent if news resonates more when about imminent consump tion than when about future consumption a decision maker might to generate pleasant surprises overconsume early relative to the optimal committed plan increase immediate consumption following surprise wealth increases and delay decreasing consumption following surprise losses since higher wealth mitigates the effect of bad news people exhibit an unambiguous first order precautionary savings motive