Quantifying the Premium Externality of the Uninsured

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

Detail(s)

Original languageEnglish
Pages (from-to)405-437
Journal / PublicationJournal of the European Economic Association
Volume14
Issue number2
Online published22 Aug 2015
Publication statusPublished - 1 Apr 2016
Externally publishedYes

Abstract

In insurance markets, the uninsured can generate a negative externality on the insured, leading insurance companies to charge higher premia. Using a novel panel data set and a staggered policy change that introduces exogenous variation in the rate of uninsured drivers at the county level in California, we find that uninsured drivers lead to higher insurance premia: a 1 percentage point increase in the rate of uninsured drivers raises premia by roughly 1%. We calculate the monetary fine on the uninsured that would fully internalize the externality and conclude that actual fines in most US states are inefficiently low.

Citation Format(s)

Quantifying the Premium Externality of the Uninsured. / Sun, Stephen Teng; Yannelis, Constantine.

In: Journal of the European Economic Association, Vol. 14, No. 2, 01.04.2016, p. 405-437.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review