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"It is well known that public or pooled insurance coverage can induce a form of ex-ante moral hazard: people make inefficiently low investments in self-protective activities. This paper points out another ex-ante moral hazard that arises through an induced innovation externality. This alternative mechanism, by contrast, causes people to devote an inefficiently high level of self-protection. As an empirical example of this externality, we analyze the innovation induced by the obesity epidemic. Obesity is associated with an increase in the incidence of many diseases. The induced innovation hypothesis is that an increase in the incidence of a disease will increase technological innovation specific to that disease. The empirical economics literature has produced substantial evidence in favor of the induced innovation hypothesis.We first estimate the associations between obesity and disease incidence. We then show that if these associations are causal and the pharmaceutical reward system is optimal the magnitude of the induced innovation externality of obesity roughly coincides with the Medicare-induced health insurance externality of obesity. The current Medicare subsidy for obesity therefore appears to be approximately optimal. We also show that the pattern of diseases for obese and normal weight individuals are similar enough that the induced innovation externality of obesity on normal weight individuals is positive as well"--National Bureau of Economic Research web site.
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The other ex-ante moral hazard in health
2008, National Bureau of Economic Research
Electronic resource
in English
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Book Details
Edition Notes
Title from PDF file as viewed on 6/16/2008.
Includes bibliographical references.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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- Created September 27, 2008
- 5 revisions
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December 22, 2020 | Edited by MARC Bot | import existing book |
July 31, 2012 | Edited by VacuumBot | Updated format '[electronic resource] /' to 'Electronic resource' |
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October 28, 2008 | Edited by ImportBot | Found a matching Library of Congress MARC record |
September 27, 2008 | Created by ImportBot | Imported from Library of Congress MARC record |