Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Chapter 4, Problem 9E
To determine
Determine whether the given statement is true or false.
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The following information applies to questions 34 and 35.
Assume that driving skill, S, varies throughout the population. Automobile insurers classify drivers into two categories: “Good” and “Bad”. Good drivers are those people who have driving skills above a threshold level of driving skill, S*. Bad drivers, on the other hand, have driving skills that fall below the threshold level, S*. Good drivers pay lower rates than Bad drivers. Additionally, assume that it’s common knowledge that Welsh are more skillful drivers than Scots, such that a higher proportion of the Welsh population has driving skills above S* than the Scottish population. Also assume that there is a law that prohibits insurers from learning a person’s driving skill.
Which group would be most likely to invest in a lobbying campaign supporting a law that would prohibit the use of these new data collection devices?
A.
Welsh with driving skills greater than S*
B.
Scots with driving skills…
Would you support mandatory health insurance
based on the evidence from the Oregan Health
Insurance Experiment.
Consider that you want to apply the difference-in-differences approach to evaluate the
Health Insurance Subsidy Program (HISP). In this scenario, you have two rounds of data
on two groups of households: one group that enrolled in the program, and another that
did not. You know that you cannot compare the average health expenditures of the two
groups because of selection bias, thus you decide to compare change in health
expenditures as follows:
Table 7.2 Evaluating HISP: Difference-in-Differences Comparison of Means
After
Before
(baseline)
(follow-up)
Difference
Enrolled
7.84
14.49
-6.65
Nonenrolled
22.30
20.79
1.51
Difference
DD = -6.65 – 1.51 = -8.16
Note: The table presents mean household health expenditures (in dollars) for enrolled and
nonenrolled households, before and after the introduction of HISP.
How should you interpret this difference ($USD -8.16)? What are the basic assumptions
required to accept this result from difference-in-differences?
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