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

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

Quality externalities among hotel establishments: what is the impact of tour operators?

This paper is about quality decisions in a vertical structure where competitive producers sell to powerful retailers. Specifically, we focus the analysis on the role played by a tour operator (TO) on quality investments when distributing the capacity of a given tourist destination. We emphasize the presence of quality externalities among hotel establishments, and see that sometimes a TO distribution can provide a solution to the tragedy of the commons in qualityprovision. Thus, we analyze what implications do vertical relations have for quality in this industry, and then derive some policy recommendations. This paper is about quality decisions in a vertical structure where competitive producers sell to powerful retailers. Specifically, we focus the analysis on the role played by a tour operator (TO) on quality investments when distributing the capacity of a given tourist destination. We emphasize the presence of quality externalities among hotel establishments, and see that sometimes a TO distribution can provide a solution to the tragedy of the commons in qualityprovision. Thus, we analyze what implications do vertical relations have for quality in this industry, and then derive some policy recommendations

Early evaluation of a new nutrition and education programme in Colombia

From introduction: In recent years, international financial institutions, policy-makers and economists have paid considerable attention to micro development policies based on cash transfers targeted to poor families and released only if the potential beneficiaries comply with specific conditions. Such conditional cash transfers have been particularly popular in education and nutrition policies – that is, in policies whose aim is to foster the accumulation of human capital among young children. In the case of the nutrition interventions, the conditions are often that the mother of the children, who receives the transfers, enrols them to development and growth check-ups and/or attends hygiene, vaccination and contraception courses. Much of the attention on conditional transfer programmes originated from the perceived success of a large programme of this nature started in rural Mexico in 1998 and evaluated scientifically with semi-experimental methods. Since the evidence on PROGRESA, as the Mexican programme was known, has received much attention, several international organisations have been promoting similar interventions in many developing countries and in particular in Latin America. It should be stressed that while PROGRESA has been widely branded as a success and has surely improved the nutritional and development outcomes of very young children and enrolment for secondary school, the reasons behind this success are not entirely obvious. In particular, it is not completely clear whether the conditionalities imposed by the programme played a role in determining the outcomes and what that role was

Baseline report on the evaluation of Familias en Acción

This report describes the survey that was carried out in 122 communities in rural Colombia by the consortium formed by the Institute for Fiscal Studies, Econometria and SEI as the baseline for the impact evaluation of Familias en Acción, a programme to foster the accumulation of human capital in rural Colombia, run by the Colombian government. In this report, we will not describe in detail the programme or the methodology of the proposed evaluation, as this was done in IFS-Econometria-SEI (2003a). The main aim of the document is to discuss the first, baseline survey that was collected for this evaluation. While the baseline survey cannot, by definition, be used to perform impact evaluation, towards the end of the report we exploit the slightly peculiar way in which the programme was started and have a first very preliminary glance at some of the impacts that the programme might have. The methodological caveats on interpreting these results should be taken very seriously. This report does not contain an extensive ‘fieldwork’ report. This is included in SEI (2003). Analogously, we do not discuss extensively the operation of the programme and the evidence that emerged on related issues and on targeting. These issues are covered in IFS-Econometria- SEI (2003b, 2003c). We will be referring to some of the issues raised in those reports, however. This report is divided into five chapters. In Chapter 1, we briefly summarise the main features of the programme and its proposed evaluation. A more detailed description of both of these aspects is contained in IFS-Econometria-SEI (2003a). Here, however, we give some details on the expansion of the programme and on the features of this expansion that allow a first and preliminary analysis of the impact of the programme. In Chapter 2, we describe the statistical methodology that will be used in the report. This includes the methodology for the data description that constitutes the largest part of the report and for the preliminary impact evaluation. Chapter 3 describes the baseline survey. This chapter is divided into several sections, each referring to a particular module. In each section, we first describe the ‘treatment’ population – that is, the households eligible for the programme that were living in villages targeted by the programme. We then move on to the population living in ‘control’ villages – that is, in villages that were not targeted by the programme and yet are, nonetheless, reasonably similar to the treatment villages. Chapter 4 presents the preliminary impact evaluation

What would you do? An investigation of stated-response data

When analysing choices or policy impacts, economists generally rely on what people actually do, rather than what they say they would do. The "stated response" approach is treated with scepticism due, for example, to concerns regarding the effect of strategic or social considerations on what people say, and a belief that people may not adequately consider such a hypothetical question. This paper evaluates an example of this approach; the direct questioning of parents as to whether they would withdraw their children from school if the Familias en Accion education subsidies were withdrawn. Our results suggest that these concerns are not entirely invalid but that the stated responses do provide important information and correlate in the expected manner with child and household characteristics. We conclude by emphasising the importance of good question design, which may allow researchers to use the "stated response" method as a complement to more typical quantitative methodologies

Child health in rural Colombia: determinants and policy interventions

In this paper we study the determinants of child anthropometrics on a sample of poor Colombian children living in small municipalities. We focus on the influence of household consumption, and public infrastructure. We take into account the endogeneity of household consumption using two different sets of instruments: household assets and municipality average wage. We find that household consumption is an important determinant of child health. The importance of the effect is confirmed by the two different sets of instruments. We find that using ordinary least squares would lead to conclude that the importance of household consumption is much smaller than the instrumental variable estimates suggest. The presence of a public hospital in the municipality positively influences child health. The extent of the piped water network positively influences the health of children if their parents have at least some education. The number of hours of growth and development check-ups is also an important determinant of child health. We find that some of these results only show up once squared and interaction terms have been included in the regression. Overall, our estimates suggest that both public and private investments are important to improve child health in poor environments

Testing for Asymmetric Information in Private Health Insurance

We test for asymmetric information in the UK private health insurance (PHI) market. In contrast to earlier research that considers either a purely private system or one where private insurance is complementary to public insurance, PHI is substitutive of the public system in the UK. Using a theoretical model of competition among insurers incorporating this characteristic, we link the type of selection (adverse or propitious) with the existence of risk-related information asymmetries. Using the British Household Panel Survey, we find evidence that adverse selection is present in the PHI market, which leads us to conclude that such information asymmetries exist

How effective are conditional cash transfers? Evidence from Colombia

Conditional cash transfer (CCT) programmes are becoming an extremely popular tool for improving the education and health outcomes of poor children in developing countries. An incomplete list of countries in which they are being implemented under the support of the World Bank and other international financial institutions includes Mexico, Honduras, Nicaragua, Brazil, Turkey and Mozambique. While the implementation details vary from country to country, many are modelled on the Mexican PROGRESA. In a typical CCT, mothers from poor backgrounds receive cash conditional on their promoting certain activities on behalf of their children. For their youngest children - usually those below the age of 6 - the conditionality involves visits to preventive healthcare centres in which their growth is monitored. School attendance is the most common stipulation for receipt of cash transfers for older children - usually those between 7 and 17 years old. This targeting of health and education of children is at the essence of the long-term poverty alleviation objective of CCT programmes. Such transfer programmes are also aimed at the short-term reduction of poverty, through the provision of immediate funds to indigent households. In this Briefing Note, we will focus on the programme Familias en Acción (FA), the CCT implemented by the Colombian government from 2001/02. In particular, we will provide estimates of how the programme has influenced key welfare indicators such as school attendance, child nutrition and health status, as well as household consumption. In this respect, we will update the preliminary results that were reported in Attanasio et al. (2003 and 2004)