Asymmetric information in insurance: general testable implications

By Pierre-Andre Chiappori, Bruno Jullien, Bernard Salanié, François Salanié. 2006

330 citations recorded by the source corpus.

Several recent articles on empirical contract theory and insurance have tested for a positive correlation between coverage and ex post risk, as predicted by standard models of pure adverse selection or pure moral hazard. We show here that the positive correlationproperty can be extended to general setups: competitive insurance markets and cases where risk aversion is public. We test our results on a French dataset. Our tests confirm that the estimated correlation is positive; they also suggest the presence of market power.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a99b2b0b4a670b2691e6ee09cde4ba2e41abefe6

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In Economics and Econometrics

Citations in the corpus

Quantifying Search and Switching Costs in the U.S. Auto Insurance Industry (2014, positive): “where η j and μ PI denote the parameters estimated based on the pricing regression shown in equation (14) and p ij denotes the residuals from the pricing regression shown in equation (13).”
Are Risk Preferences Stable Across Contexts? Evidence from Insurance Data (2011, background): “…data do not find evidence of a positive correlation between risk and coverage (PierreAndré Chiappori 1999; Chiappori and Salanié 2000; Chiappori et al. 2006; Dionne, Gouriéroux, and Vanasse 1999, 2001).45 These studies have been interpreted as casting doubt on the presence of moral…”
Securitization is Not that Evil after All (2011, neutral): “The methodology proposed to implement this empirical test is conducted in two steps (Chiappori and Salanié, 2000; for an extensive survey see Chiappori et al., 2006).”
Sources of Advantageous Selection: Evidence from the Medigap Insurance Market (2006, neutral): “As shown in the theoretical analysis of Chiappori et al. (2006), in order for multidimensional private information to manifest itself in the form of a violation of the positive correlation property, the supply side of the insurance market has to be noncompetitive in the sense that the insurance…”
Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi (2012, positive): “Following several recent articles that use data from insurance markets to test for the presence of asymmetric information (Chiappori and Salanié 2000, 2003; Chiappori et al. 2006), the predictions of the theoretical model of Section III can be used to perform a similar test.”
Social Insurance: Connecting Theory to Data (2012, background): “, 1999; Finkelstein and Poterba, 2002), health insurance (Newhouse, 2002), and automobile insurance (Chiappori et al., 2006).”
Testing Conditional Independence via Rosenblatt Transforms (2009, background): “The conditions for the kernel and the bandwidths in (16) are subsumed in the condition (ii) above.”
Screening risk-averse agents under moral hazard: single-crossing and the CARA case (2006, neutral): “Second, Chiappori et al. (2002) prove that the positive correlation result must hold for a large class of models, including competitive models and models where risk-aversion is public.”