Health Insurance Subsidies and Asymmetric Information:
Experimental Evidence from Kenya
Co-authors: Jack Willis (Columbia University, Assistant Prof.) and Lorenzo Casaburi (University of Zurich, Associate Prof.)
Stage: Funding secured, IRB approval obtained, research activities started
Health insurance products often suffer from low demand at commercial prices. Should they be subsidized? On the demand side, this depends on how subscribers benefit from insurance and whether their demand is too low conditional on price. On the supply side, subsidies may affect costs of insurance providers due to asymmetric information. Working with an innovative financial company in Kenya, we conduct a suite of randomized control trials. We evaluate the impact of health insurance on subscribers, and we test for the effect of subsidies on selection into insurance, moral hazard for marginal subscribers, and sunk cost effects for inframarginal subscribers.
Peer Effects in Deposit Markets
Co-author: Naz Koont (Columbia University, PhD Candidate)
We provide first empirical evidence that consumer peer effects matter for banks' deposit demand. Using a novel measure that depicts for each county how exposed peers are to a specific bank in a given year, we tightly identify the causal effect of peer exposure on deposit demand through a fixed effects identification strategy. We address key empirical challenges such as time-invariant homophily. We find that a one percent increase in a bank's peer exposure leads to a 0.05 percent increase in deposit market share. This effect has become stronger over time with the rise of the internet and social media, which facilitate cross-county communication. Peer exposure is especially relevant for smaller banks and customers that have access to the internet.
The Pain of Paying Taxes Early: Evidence from Ecuadorian Firms
Co-authors: Rebecca DeSimone (London Business School, Assistant Prof.) and Néstor Rondal (Ecuadorian Tax Authority)
Stage: Data analysis
Tax incidence distorts firm incentives, but does the timing of tax payments? If firms are financially constrained, earlier tax payments could limit the amount available to invest or to buffer adverse events. We use quasi-exogenous variation in the amount that firms in Ecuador withhold from their suppliers at the transaction level. This allows us to study the effect of paying more taxes upfront instead of at the annual tax filing on supplier-level outcomes, including investment and survival. While tax withholding is a key strategy to increase government oversight and tax revenue, we assess whether it needs to be weighed against unintended consequences.