Adverse Selection and Moral Hazard in Insurance : Can Dynamic Data Help to Distinguish ?

@inproceedings{Abbring2003AdverseSA,
  title={Adverse Selection and Moral Hazard in Insurance : Can Dynamic Data Help to Distinguish ?},
  author={Jaap H. Abbring and Pierre-Andre Chiappori and James J. Heckman and Jean Pinquet},
  year={2003}
}
A standard problem of applied contracts theory is to empirically distinguish between adverse selection and moral hazard. We show that dynamic insurance data allow to distinguish moral hazard from dynamic selection on unobservables. In the presence of moral hazard, experience rating implies negative occurrence dependence: individual claim intensities decrease with the number of past claims. We discuss econometric tests for the various types of data that are typically available. Finally, we argue… CONTINUE READING

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