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Unobserved Heterogeneity, State Dependence, and Health Plan Choices

Author

Listed:
  • Ariel Pakes
  • Jack R. Porter
  • Mark Shepard
  • Sophie Calder-Wang

Abstract

We provide a new method to analyze discrete choice models with state dependence and individual-by-product fixed effects and use it to analyze consumer choices in a policy-relevant environment (a subsidized health insurance exchange). Moment inequalities are used to infer state dependence from consumers’ switching choices in response to changes in product attributes. We infer much smaller switching costs on the health insurance exchange than is inferred from standard logit and/or random effects methods. A counterfactual policy evaluation illustrates that the policy implications of this difference can be substantive.

Suggested Citation

  • Ariel Pakes & Jack R. Porter & Mark Shepard & Sophie Calder-Wang, 2021. "Unobserved Heterogeneity, State Dependence, and Health Plan Choices," NBER Working Papers 29025, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29025
    Note: EH IO PE
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    Cited by:

    1. Bo E. Honor'e & Chris Muris & Martin Weidner, 2021. "Dynamic Ordered Panel Logit Models," Papers 2107.03253, arXiv.org, revised Apr 2024.
    2. Andrew Chesher & Adam Rosen & Yuanqi Zhang, 2023. "Identification analysis in models with unrestricted latent variables: Fixed effects and initial conditions," IFS Working Papers WCWP20/23, Institute for Fiscal Studies.
    3. Andrew Chesher & Adam Rosen & Yuanqi Zhang, 2024. "Robust analysis of short panels," CeMMAP working papers 01/24, Institute for Fiscal Studies.
    4. Victor Aguirregabiria & Jesus Carro, 2021. "Identification of Average Marginal Effects in Fixed Effects Dynamic Discrete Choice Models," Working Papers tecipa-701, University of Toronto, Department of Economics.
    5. Christopher Turansick, 2023. "Random Utility, Repeated Choice, and Consumption Dependence," Papers 2302.05806, arXiv.org, revised Oct 2023.

    More about this item

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing

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