Essays on Health Economics

This thesis consists of three chapters on health economics. The first chapter attempts to offer evidence that consumers learn about the characteristics of their health insurance plans, using data from the RAND Health Insurance Experiment. A participation incentive payment was offered by the experiment to encourage participants to join and stay in the experiment, which resulted in the probabilities of refusing enrollment being very similar across some plans. Based on the idea that attrition rates would remain similar without learning, I propose a simple framework to test whether consumers learn about their plan characteristics. The second chapter seeks to develop a framework to improve the estimation of the health production function. Health is a complex and multifaceted concept, but to date most empirical research on health capital over the lifecycle models health as unidimensional and often relies on a single observable variable. In this chapter, we develop a dynamic multidimensional factor model for health capital that represents distinct features of health and allows for measurement error in observed health proxies. We focus on two broad, and distinct, dimensions of health: acute and chronic conditions. Our findings indicate that medical care has a stronger effect on chronic health. We also find evidence of unobserved heterogeneity in health production that is correlated with the choice of medical inputs. The third chapter investigates how information about health insurance plan characteristics impacts consumer healthcare decisions and welfare. Models of consumer decision-making in healthcare typically assume that consumers are fully informed about the characteristics of their health insurance plans. In practice, however, this assumption may be unrealistic. In this chapter, I develop a dynamic structural model of consumer decision-making in healthcare, allowing that consumers may initially hold biased beliefs about their effective coinsurance rates (the average percentage of medical expenditures paid by consumers), which they may learn about via their reimbursement rates. The results suggest that consumers' initial beliefs significantly deviate from the true rates, and that consumers learn very slowly. The counterfactuals show that consumers' medical spending and welfare are substantially distorted under biased beliefs.

Name thesis:degree_name

Ph D

Discipline thesis:degree_discipline

Economics

Grantor dc:publisher

The University of Western Ontario

Year dc:date.issued

2025

Author dc:creator

• Liu, Tian

Advisor dc:contributor.advisor

• Mehta, Nirav

• biased beliefs
• learning
• health insurance
• health production

Language dc:language.iso

en

Handle dc:identifier.uri

https://hdl.handle.net/20.500.14721/38531

OAI identifier oai:identifier

oai:uwo.scholaris.ca:20.500.14721/38531