Handbook of Public Economics, Vol. 5

2.2.2.2 Health Insurance

Cutler and Zeckhauser (2000) review a large literature that tends to find a positive correlation between insurance coverage and risk occurrence in health insurance. Conditional on the menu of contracts offered to them, individuals with more health insurance tend to have higher medical spending than individuals with less insurance. This literature provides a nice example of the substantive importance of conditioning on the observable characteristics of the individual that determine the menu of contracts offered to him, as emphasized by Chiappori and Salanie (2000). In particular, since employer offering of health insurance is such a major determinant of coverage, some of the most convincing implementations of the positive ...