Job Market Paper
Adverse Selection in ACA Exchange Markets: Evidence from Colorado
This study tests for adverse selection in the recently established Affordable Care Act (ACA) health insurance exchanges, and quantifies the consequences for consumer welfare and market efficiency. Using a new statewide dataset of medical claims from Colorado, I use plausibly exogenous premium variation generated by geographic discontinuities to test for adverse selection. In this context, a positive relationship between premiums and medical spending of the insured population indicates adverse selection, as the lowest cost individuals are the first to drop out of the market in response to rising premiums. I find evidence of adverse selection in the non-group market, where a 1% increase in premiums leads to a 0.8% increase in the average annual med- ical expenditures of the insured population. I then estimate insurance demand using the same geographic premium variation. Together, the demand and cost estimates provide a framework for calculating the welfare loss due to selection, as well as an evaluation of policy interventions. My estimates indicate that providing additional premium subsidies would enhance welfare in this market, and moreover, due to heterogeneity across age groups in both demand and costs, I estimate that age-targeted premium subsidies can be a more cost-effective use of public funds to enhance welfare. These results offer the first quasi-experimental evidence of adverse selection directly in the new ACA Exchange markets, and conclusions from the policy evaluations can have implications for effectiveness going forward of this cornerstone of the ACA.
The Empirical Economist’s Toolkit: From Models to Methods
(with John D. Singleton)
Forthcoming History of Political Economy.
While historians of economics have noted the transition toward empirical work in economics since the 1970s, less understood is the shift toward “quasi-experimental” methods in applied microeconomics. Angrist and Pischke (2010) trumpet the wide application of these methods as a “credibility revolution” in econometrics that has finally provided persuasive answers to a diverse set of questions. Particularly influential in the applied areas of labor, education, public, and health economics, the methods shape the knowledge produced by economists and the expertise they possess. First documenting their growth bibliometrically, this paper aims to illuminate the origins, content, and contexts of quasi-experimental research designs, which seek natural experiments to justify causal inference. To highlight lines of continuity and discontinuity in the transition, the quasi-experimental program is situated in the historical context of the Cowles econometric framework and a case study from the economics of education is used to contrast the practical implementation of the approaches. Finally, significant historical contexts of the paradigm shift are explored, including the marketability of quasi-experimental methods and the 1980s crisis in econometrics.
The Effects of Electricity Costs on Firm Re-location Decisions: Insights for the Pollution Havens Hypothesis?
(with Lucia Lavric and Nicholas Hanley)
Environ Resource Econ., 2016
Electricity costs are partly driven by environmental policy choices. In this paper, the effects of variations in electricity costs—as measured by end-user electricity prices–on firm relocation decisions are investigated. Using a discrete choice model and a data base that has not previously been exploited to study this problem, we investigate the effects of variations in electricity costs on the intensive and extensive re-location decisions of European firms. We find that electricity costs play a significant role in determining relocation destinations. This effect is asymmetric between firms moving into and out of a country, and between high and low energy intensity sectors. The findings of the paper have implications for the Pollution Havens Hypothesis, since they show the extent to which the effects of climate policy on domestic electricity costs can be expected to impact on firm relocation decisions both into and out of a country.
Work in Progress
Insurer-hospital Bargaining in Selection Markets