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Structural estimation of a principal-agent model: moral hazard in medical insurance.

By M Vera-Hernandez

Abstract

Despite the importance of principal-agent models in the development of modern economic theory, there are few estimations of these models. I recover the estimates of a principal-agent model and obtain an approximation to the optimal contract. The results show that out-of-pocket payments follow a concave profile with respect to costs of treatment. I estimate the welfare loss due to moral hazard, taking into account income effects. I also propose a new measure of moral hazard based on the conditional correlation between contractible and noncontractible variables.

OAI identifier: oai:RePEc:ner:ucllon:http://discovery.ucl.ac.uk/4097/
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