Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

L51: Economics of Regulation

Estimating Equilibrium in Health Insurance Exchanges: Price Competition and Subsidy Design under the ACA

Pietro Tebaldi

To design premium subsidies in a health insurance market it is necessary to estimate consumer demand, cost, and study how different subsidy schemes affect insurer's incentives. I combine data on household-level enrollment and plan-level claims from the California Affordable Care Act insurance exchange with a model of insurance demand and insurers' competition to assess equilibrium outcomes under alternative subsidy designs. I estimate that younger households are significantly more price sensitive and cheaper to cover.

Occupational Licensing Reduces Racial and Gender Wage Gaps: Evidence from the Survey of Income and Program Participation

Peter Blair, Bobby Chung

In order to work legally, 29% of U.S. workers require an occupational license. We show that occupational licensing reduces the racial wage gap between white and black men by 43%, and the gender wage gap between women and white men by 36%-40%. For black men, a license is a positive indicator of non-felony status that aids in firm screening of workers, whereas women experience differentially higher returns to the human capital that is bundled with occupational licenses.

Optimal Aggregation of Consumer Ratings: An Application to Yelp.com

Weijia Dai, Ginger Jin, Jungmin Lee, Michael Luca

Consumer review websites such as Yelp.com leverage the wisdom of the crowd, with each product being reviewed many times (some with more than 1000 reviews). Because of this, the way in which information is aggregated is a central decision faced by consumer review websites. Given a set of reviews, what is the optimal way to construct an average rating?

Regulatory Sanctions and Reputational Damage in Financial Markets

John Armour, Colin Mayer, Andrea Polo

We study the impact of the announcement of enforcement of financial and securities regulation by the UK‘s Financial Services Authority and London Stock Exchange on the market price of penalized firms. Prior literature on reputational penalties has suffered from the existence of a number of confounding factors that render it hard to disentangle reputational from other losses. In the UK, the FSA and LSE only make the investigation (and its result) public if and when the firm is found to have breached the rules and incurs a fine and/or an order to pay compensation.