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Beyond Testing: Empirical Models of Insurance Markets

Author

Listed:
  • Liran Einav
  • Amy Finkelstein
  • Jonathan Levin

    (Department of Economics, Stanford University, Stanford, California 94305, and NBER
    2Department of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts 02142, and NBER)

Abstract

We describe recent advances in the empirical analysis of insurance markets. This new research proposes ways to estimate individual demand for insurance and the relationship between prices and insurer costs in the presence of adverse and advantageous selection. We discuss how these models permit the measurement of welfare distortions arising from asymmetric information and the welfare consequences of potential government policy responses. We also discuss some challenges in modeling imperfect competition between insurers and outline a series of open research questions.

Suggested Citation

  • Liran Einav & Amy Finkelstein & Jonathan Levin, 2010. "Beyond Testing: Empirical Models of Insurance Markets," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 311-336, September.
    • Handle: RePEc:anr:reveco:v:2:y:2010:p:311-336
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev.economics.050708.143254
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    More about this item

    Keywords

    asymmetric information; adverse selection;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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