Pierre-André Chiappori

RATIONAL HOUSEHOLD LABOR SUPPLY

In this paper, household is modeled as a two-member collectivity taking Pareto-efficient decisions. The consequences of this assumption are analyze d in a three-good model, in which only total consumption and each mem bers labor supply are observable. If the agents are assumed egoistic (i.e., they are only concerned with their own leisure and consumptio n), it is possible to derive falsifiable conditions upon household la bor supplies from both a parametric and a nonparametric viewpoint. If , alternatively, agents are altruistic, restrictions obtain in the no nparametric context; useful interpretation stems from the comparison with the characterization of aggregate demand for a private-good econ omy. Copyright 1988 by The Econometric Society.

Efficient Intra-Household Allocations - A General Characterization and Empirical Tests

The neoclassical theory of demand applies to individuals, yet in empirical work it is usually taken as valid for households with many members. This paper explores what the theory of individuals implies for households that have more than one member. We make minimal assumptions about how the individual members of the household resolve conflicts. All we assume is that however decisions are made, outcomes are efficient. We refer to this as the collective setting. We show that in the collective setting household demands must satisfy a symmetry and rank condition on the Slutsky matrix. We also present some further results on the effects on demands of variables that do not modify preferences but that do affect how decisions are made. We apply our theory to a series of surveys of household expenditures from Canada. The tests of the usual symmetry conditions are rejected for two-person households but not for one-person households. We also show that income pooling is rejected for two-person households. We then test for our collective setting conditions on the couples data. None of the collective setting restrictions are rejected. We conclude that the collective setting is a plausible and tractable next step to take in the analysis of household behavior.

Testing for Asymmetric Information in Insurance Markets

The first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context. We also argue that insurance data are particularly well suited to such empirical investigations. To illustrate this claim, we use data on contracts and accidents to investigate the extent of asymmetric information in the French market for automobile insurance. Using various parametric and nonparametric methods, we find no evidence for the presence of asymmetric information in this market.

Marriage Market, Divorce Legislation and Household Labor Supply

This paper provides a theoretical framework for analyzing the impact of the marriage market and divorce legislation on household labor supply. In our approach, the sex ratio in the marriage market and the rules governing divorce are examples of “distribution factors.” These factors are defined as variables that affect the household members’ bargaining position but not preferences or the joint budget set. We extend the collective labor supply model developed by Chiappori to allow for distribution factors. We show that our model imposes new restrictions on the labor supply functions and eases the identification of individual preferences and the intrahousehold decision process. The model is estimated using PSID data for the year 1988. Our results do not reject the restrictions imposed by the model. Also, the sex ratio and divorce laws deemed favorable to women are found to affect labor supply behavior and the decision process in the directions predicted by the theory and to have sizable effects.

Testing Contract Theory: A Survey of Some Recent Work

While the theoretical literature on contracts has been enormous since the seventies, empirical tests of the theory have long remained scarce. However, new empirical work has been developed in the last ten years that sheds light on the empirical validation of the theory. This paper aims at surveying the recent empirical work on contracts. The focus throughout is on the need to properly account for unobserved heterogeneity.

Collective labor supply with children

We extend the collective model of household behavior to allow for the existence of public consumption. We show how this model allows the analysis of welfare consequences of policies aimed at changing the distribution of power within the household. Our setting provides a conceptual framework for addressing issues linked to the “targeting” of specific benefits or taxes. We also show that the observation of the labor supplies and the household demand for the public good allow one to identify individual welfare and the decision process. This requires either a separability assumption or the presence of a distribution factor.

Moral Hazard and the Demand for Physician Services: First Lessons from a French Natural Experiment

This paper presents first empirical results on moral hazard in demand for physician services, using a longitudinal dataset on 4578 individuals followed during two years. The data set contains two subgroups, one for which a copayment rate of 10% for physician visits was introduced in 1994, and an other for which no change occured during the period of the study. This enables us to use these data as coming from a controlled natural experiment. We test if the number of visits per agent was modified by this copayment rate. The data reject the hypothesis for office visits, but do not for home visits. This suggests that there is moral hazard in demand for some physician services, but also that when non-monetary costs are important, small changes in monetary price may not induce any major change in behaviour.

Spatial competition in the banking system: Localization, cross subsidies and the regulation of deposit rates

Abstract The paper analyses a spatial competition model of the banking sector. Banks offer two kind of services (deposits and credit) and can either borrow or lend on the money market. We investigate the consequences of the regulation of rates paid on deposits. The main conclusions are as follows. Regulation first increases network size beyond social optimum. In the long run it results in lower equilibrium credit rates because of increased competition. Secondly, regulation generates tied sales contracts, by which banks propose bundles of credit and deposit services. Tied sales, in turn, motivate the introduction of cross-subsidies between the two activities, the rent levied upon regulated deposits financing lower rates in the credit market. Finally it is shown that in a regulated environment, the effectiveness of monetary policy is reduced in the sense that fluctuations of money market rates are less than fully transmitted in credit rates.

ADVERSE SELECTION AND MORAL HAZARD IN INSURANCE: CAN DYNAMIC DATA HELP TO DISTINGUISH?

A standard problem of applied contracts theory is to empirically distinguish between adverse selection and moral hazard. We show that dynamic insurance data allow to distinguish moral hazard from dynamic selection on unobservables. In the presence of moral hazard, experience rating implies negative occurrence dependence: individual claim intensities decrease with the number of past claims. We discuss econometric tests for the various types of data that are typically available. Finally, we argue that dynamic data also allow to test for adverse selection, even if it is based on asymmetric learning. (JEL: D82, G22, C41, C14)

Econometric Models of Insurance under Asymmetric Information

The paper surveys recent empirical studies that test for or evaluate the importance of asymmetric information in insurance relationships. I first discus the main conclusions reached by insurance theory in both a static and a dynamic framework. A particular emphasis is put on the testable consequences that can be derived from existing models. I review several studies exploiting these theoretical insights in a static context. Then I briefly consider the dynamic aspects.