- The regulation of health care providers’ payments when horizontal and vertical differentiation matter , 2012, Journal of Health Economics, 31, 691-704 (with David Bardey and Jean-Marie Lozachmeur)
This paper analyzes the regulation of payment schemes for health care providers competing in both quality and product differentiation of their services. The regulator uses two instruments: a prospective payment per patient and a cost reimbursement rate. When the regulator can only use a prospective payment, the optimal price involves a trade-off between the level of quality provision and the level of horizontal differentiation. If this pure prospective payment leads to underprovision of quality and overdifferentiation, a mixed reimbursement scheme allows the regulator to improve the allocation efﬁciency. This is true for a relatively low level of patients’ transportation costs. We also show that if the regulator cannot commit to the level of the cost reimbursement rate, the resulting allocation can dominate the one with full commitment. This occurs when the transportation cost is low or high enough, and the full commitment solution either implies full or zero cost reimbursement.
- Long term care insurance and family norms, 2013, The B.E. Journal of Economic Analysis and Policy (Advances), 14, 401-428 (with Pierre Pestieau)
Long term care (LTC) is mainly provided by the family and subsidiarily by the market and the government. To understand the role of these three institutions it is important to understand the motives and the working of family solidarity. In this paper we focus on the case when LTC is provided by children to their dependent parents out of some norm that has been inculcated to them during their childhood by some exemplary behavior of their parents towards their own parents. In the first part, we look at the interaction between the family and the market in providing for LTC. The key parameters are the probability of dependence, the probability of having a norm-abiding child and the loading factor. In the second part, we introduce the government which has a double mission: correct for a prevailing externality and redistribute resources across heterogeneous households.
- Smoking within the household: spousal peer effects and children’s health implications, 2015, The B.E. Journal of Economic Analysis and Policy, 15, 1939-1973 (Topics) (with Pierre Dubois)
We study spousal peer effects on smoking and their implication for the health of children. Smoking decisions are modeled as equilibrium strategies of an incomplete information game within the couple. Using French data, we identify two peer effects: a smoking enhancing effect of smoking partners and a smoking deterring effect of non-smoking partners. An implication of these findings is that the smoking behavior may differ qualitatively in couples where both partners smoke and where only one partner smokes. This interpretation is supported by our finding that, controlling for total tobacco consumption of parents, the respiratory health of children is negatively affected only if both parents smoke.
- Public and Private Hospitals, Congestion, and Redistribution, 2016, Journal of Public Economic Theory, 18 ,42-66 (with Marie-Louise Leroux)
This paper studies how congestion in the public health sector can be used as both an in-kind and in-cash redistributive tool. In our model, agents differ in productivity and they can obtain a health service either from a congested public hospital or from a non congested private one at a higher price. With pure in-kind redistribution, agents fail to internalize their impact on congestion, and the demand for the public hospital is higher than optimal. When productivities are not observable but the social planner can assign agents across hospitals, the optimal congestion is higher than in the full information case in order to relax incentive constraints and foster income redistribution. Finally, if agents can freely choose across hospitals, the optimal subsidy on the private hospital price may be negative or positive depending on the relative importance of redistribution and efficiency concerns. In this case, redistribution is limited if the quality of the public facility depends on the number of users.
- Long term care and capital accumulation: the role of the family, the impact of the State, the market an the family, forthcoming, Economic Theory (with Pierre Pestieau and Emmanuel Thibault)
The rising level of long-term care (LTC) expenditures and their financing sources are likely to impact savings and capital accumulation and henceforth the pattern of growth. This paper studies how the joint interaction of the family, the market and the State influences capital accumulation in a society in which the assistance the children give to dependent parents is triggered by a family norm. We find that, with a family norm in place, the dynamics of capital accumulation differ from the ones of a standard Diamond (1965) model with dependence. For instance, if the family help is sizeably more productive than the other LTC financing sources, a pay-as-you-go social insurance might be a complement to private insurance and foster capital accumulation.
- Reference pricing with endogenous generic entry, Forthcoming, Journal of Health Economics (with Kurt Brekke and Odd Rune Straume)
Reference pricing intends to reduce pharmaceutical expenditures by increasing demand elasticity and stimulating generic competition. We develop a novel model where a brand-name producer competes in prices with several generic producers in a market with brand-biased and brand-neutral consumers. Comparing with coinsurance, we show that reference pricing, contrary to policy makers’ intentions, discourages generic entry, as it induces the brand-name producer to price more aggressively. Thus, the net effect of reference pricing on drug prices is ambiguous, implying that reference pricing can be counterproductive in reducing expenditures. However, under price regulation, we show that reference pricing may stimulate generic entry, since a binding price cap weakens the aggressive price response by the brand-name producer. This may explain mixed empirical results on the competitive effects of reference pricing. Finally, we show that reference pricing may be welfare improving when accounting for brand preferences despite its adverse effects on entry and prices.
- Does reference pricing drive out generic competition? Evidence from a policy reform (with Kurt Brekke and Odd Rune Straume)
Reference pricing (RP) is intended to reduce pharmaceutical expenditures by making demand more price elastic and thereby stimulating generic competition. However, expectation of fiercer price competition may weaken generic firms’ incentive to enter, potentially making RP counterproductive. In this paper we study the effect of RP on generic competition both at the extensive (number of generic firms) and at the intensive margin (generic firms’ market share). To identify causal e
effects, we exploit a policy reform that implemented RP for a subset of drugs in Norway in 2005 providing us with a treatment and a comparison group. Using detailed register data for the period 2003-2013, we nd that RP increased both the number of generic competitors and their market share relative to brand-name producers. Similar results are obtained using an alternative identification strategy based on regression discontinuity. Thus, the pro-competitive effect of RP is reinforced by increased generic entry.
- Maybe “honor thy father and thy mother”: uncertain family aid and the design of social long term care insurance (with Helmuth Cremer and Firouz Gahvari)
We study the role and design of private and public insurance programs when informal care is uncertain. Children’s degree of altruism is represented by a parameter which is randomly distributed over some interval. The level of informal care on which dependent elderly can count is therefore random. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider two types of LTC policies. A topping up (TU) scheme provides a transfer which is non-exclusive and can be supplemented. An opting out (OO) scheme is exclusive and cannot be topped up. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out solely at the extensive margin. However, OO is not necessarily the dominant policy as it exacerbates crowding out at the extensive margin. Finally, we show that the distortions of both policies can be mitigated by using an appropriately designed mixed policy.
Universal health systems often rely on both public provision and contracting arrangements with private hospitals. This paper studies the optimal mix of public and private provision of health care services. We propose a model in which the regulator acts as a third-party payer, and aims to ensure universal access to treatment at minimal cost. Patients need one unit of medical service and differ in the severity of illness. A private and a public hospital are available. Under incomplete contracts, ownership affects the regulatory constraints and the power of managerial incentives. Only the private manager internalizes profits, and has incentives to reject costly patients and to exert effort in cost reduction. Contracting with the private hospital is optimal when managerial effort is relatively effective in reducing costs. By using the public hospital as a last resort provider, the regulator can ensure access, provide incentives to the private manager, and internalize part of the resulting cost savings. Imposing a no-dumping constraint on the private hospital reduces the power of incentives and is not always optimal.
- Welfare state, immigration policy, and political parties’ formation (with Simona Grassi)
This paper studies the political economy of immigration policies and redistribution. Due to complementarities between high-skill and low-skill tasks in the aggregate production function, an influx of low-skill immigrants results in lower (higher) incomes for low (high)-skill native workers. Immigrants are also more likely to be beneficiary of welfare transfers. We study the political equilibrium of a model of endogenous political parties’ formation when the native population votes simultaneously on immigration policy and redistribution. We show that representatives of low-skill and high-skill workers may form a winning coalition resulting in lower redistribution and a tighter immigration policy with respect to the preferred policy mix of the middle class. Our result suggests that when immigration is a salient political issue, support for redistribution may be weakened, but not because native voters dislike or distrust immigrants per se. It provides a non-ideological reason for the fact that anti-immigration political parties also tend to be in favor of lower redistribution.
Work in progress:
- Competition in hospital markets: evidence from Norway (with Kurt Brekke, Tor Helge Holmås, Luigi Siciliani, and Odd Rune Straume)
- Mixed oligopolies: public and private firms’ incentives (with Helmuth Cremer)
- Public long term care insurance with non-linear strategic bequests (with Helmuth Cremer)
- On the Optimality of Financial Education and Contributive Pension Schemes as a Way to Correct for Individual’s Myopia (with Marie-Louise Leroux)