Vés enrere CRES Seminar - Matilde Pinto Machado (Universidad Carlos III de Madrid)

CRES Seminar - Matilde Pinto Machado (Universidad Carlos III de Madrid)

May 29th  at 13.00h - Room: 20.233


Asymmetric Information with multiple risks: the case of the Chilean Private Health Insurance Market (with Dolores De la Mata, Pau Olivella and Nieves Valdés)


In the health insurance literature, the insured risk is assumed to be uni-dimensional, typically measured as medical expenditures. The uni-dimensional assumption, however, is not without its shortcomings as it fails to recognize the explicit distinction made in most health insurance contracts between at least two risks: the risk of needing inpatient care and the risk of needing outpatient care. The two risks are covered by different degrees of generosity as in, for example, Medicare parts A and B. In this paper we show, both theoretically and empirically, that the multi-dimensionality in health risk and coverage can affect the results of the “positive correlation test” (PCT) of Asymmetric Information in either direction. The recent literature argues that failure to find evidence of adverse selection may be due to the multidimensional heterogeneity of individuals’ (unobserved) characteristics, such as risk aversion, cognitive ability, or misperceptions on risk. We instead analyze a different source of multidimensionality, namely, the presence of the two sources of risk. Notice that, contrary to the ones proposed in the literature, these dimensions are not only directly relevant to the insuree but also to the insurer. This extension is important for at least four reasons: a) individuals may have different risk profiles along these dimensions, implying that risks may not be ranked; b) insurance contracts may have different degrees of coverage along these two dimensions; c) there may be asymmetric information in one risk dimension and not in the other; (d) and most importantly, adverse selection may be underestimated if one takes aggregate measures of risk an coverage in order to reduce the analysis to one of single dimensional screening. We extend the competitive separating equilibrium of RS to allow for two sources of risk and two-dimensional coverage contracts and use its theoretical predictions to construct an alternative test of asymmetric information, which we apply to the universe of the privately insured in the Chilean health insurance market for the year 2007.



Matilde Pinto Machado is Associate Professor at the Department of Economics of Universidad Carlos III de Madrid since 2007. She holds a PhD in Economics from Boston University. During her PhD she was awarded the prestigious Alfred P. Sloan Doctoral Dissertation Fellowship. She started her career in Spain at the Institut d’Análisi Economico (CSIC) in Barcelona where she was awarded an European Marie Curie grant. She moved to the Universidad Carlos III in Madrid where she later became a Ramón y Cajal researcher and finally Associate Professor. Her main research area is Health Economics although she has also worked in Industrial Organization, Labor and Gender Economics. Her research has been published in the Journal of Health Economics, the Journal of the European Economic Association, the International Economic Review and the Journal of Econometrics among others. She is currently the President of COSME (the subcommittee of the Spanish Economic Association that promotes studies in Gender Economics). She has been Associate Editor of SERIES — the Journal of the Spanish Economic Association— and an elected member of the board of the Spanish Economic Association.



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