Price Elasticities and Social Health Insurance Choice in Germany: A Dynamic Panel Data Approach
26 Pages Posted: 24 Aug 2005
Date Written: June 2005
In 1996 free choice of health insurers has been introduced in the German social health insurance scheme. Competition between insurers was supposed to increase efficiency. A crucial precondition for effective competition among health insurers is that consumers search for lower-priced health insurers. We test this hypothesis by estimating the price elasticities of insurers' market shares. We use unique panel data and specify a dynamic panel model to explain changes in market shares. Estimation results suggest that short-run price elasticities are smaller than previously found by other studies. In the long-run, however, estimation results suggest substantial price effects.
Keywords: Competition, generalized method of moments, health insurance
JEL Classification: I18, C33
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