Market Power and Redistribution: Evidence from the Affordable Care Act
Maria Polyakova and Stephen P. Ryan
Regulatory oversight of market power has traditionally focused on losses in aggregate consumer surplus and not on the distribution of losses across consumers. This paper quantifies both the average and the distribution of efficiency distortions due to market power in the context of the Affordable Care Act’s federal health insurance Marketplaces. Using an equilibrium model of supply and demand for insurance plans, we estimate that market power leads to 21% lower surplus and 15pp lower rate of insurance for the average consumer. 47% of the subsidy-generate surplus accrues to consumers, while 53% is captured by firms. The loss in consumer surplus and in insurance coverage is not uniform, disproportionately affecting lower-income consumers. We show that the means-tested design of product subsidies exacerbates these distortions, as it reduces elasticity of demand on the margin among more price-elastic, higher marginal cost consumers. Our results caution for the use of means-tested transfers as policy tools in environments with imperfect competition and heterogeneous consumers. We conclude with a brief discussion of what our findings imply for antitrust regulation with redistributional considerations.
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The Value of a Statistical Life: Evidence from Military Retention Incentives and Occupation-Specific Mortality Hazards
with Kyle Greenberg, Michael Greenstone, and Michael Yankovich, May 2023, revision in progress.
This paper estimates the value of a statistical life (VSL), or the willingness to trade-off wealth and mortality risk, among 430,000 U.S. Army soldiers choosing whether to reenlist between 2002 and 2010. Using a discrete choice random utility approach and significant variation in retention bonuses and mortality risk, we recover average VSL estimates that range between $500,000 and $900,000, an order of magnitude smaller than U.S. civilian labor market estimates. Additionally, we fulfill Rosen’s (1974) vision to recover indifference curves between wealth and non-market goods (e.g., mortality risk) and document substantial heterogeneity in preferences across types. We find that the VSL increases rapidly with mortality risk within type, and that soldiers in combat occupations have much lower VSLs than those in noncombat occupations.
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