Date and Time
October 13, 2004
1:30 PM - 3:00 PM

Availability
Open to the public
No RSVP required

Speaker
Jay Bhattacharya - Stanford University

There is a widespread belief among economists that the employment relationship ameliorates the adverse selection problem in health insurance. A job is a place where people come together for reasons other than health insurance. To our knowledge, however, no one has explored the conditions under which the labor market solves the adverse selection problem in health insurance.

Presenter Jay Bhattacharya has constructed a joint model of the labor market and health insurance provision with asymmetric information between employers and employees about the health status of workers. He and his colleagues have found that the key variable determining whether labor markets can solve the adverse selection problem is labor market friction. Such frictions include job-specific human capital, low job turnover probabilities, unionization, and labor market inefficiencies. Based on this work, the researchers have concluded that efficient labor markets cannot solve the adverse selection problem. Using data from the Current Population Survey, they will present empirical evidence consistent with this theory.