Dynamic moral hazard : a longitudinal examination of...

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Articles Articles Dynamic moral hazard : a longitudinal examination of automobile insurance in Canada - Shi, Peng

Collection: Articles

Title: Dynamic moral hazard : a longitudinal examination of automobile insurance in Canada / Peng Shi, Wei Zhang, Jean-Philippe Boucher

Author: Shi, Peng Icono con lupa

Notes: Sumario: This article examines moral hazard in the context of dynamic contracting in automobile insurance. Economic theory shows that experience rating of insurers results in state dependence of driving behavior under moral hazard. The empirical analysis is performed using a longitudinal data set from a Canadian automobile insurer. We employ dynamic nonlinear panel data models to distinguish the structural and spurious state dependence, and thus moral hazard and selection on unobservables. As a measure of the riskiness of driving, we consider the frequency, the number, as well as the cost of claims for the policyholder. We find that the state dependence in claim cost reflects both structural and spurious relationships, supporting the moral hazard hypothesis. However, the state dependence in claim occurrence is solely due to unobserved heterogeneity

Other categories: 322

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