The following is an excerpt from "The Labor Market Effects of Rising Health Insurance Premiums," by Katherine Baicker, Amitabh Chandra. If workers in a certain sector of the economy or those who are married are systematically more likely to have different levels of unobservable characteristics that affect health insurance premiums, then such a correlation is possible. This problem is identical to the standard endogeneity problem in program evaluation, where receipt of the treatment is correlated with unobservable characteristics of the person receiving treatment. A solution to this problem is to instrument for imputed premiums using variables that are uncorrelated with εi and mi but are correlated with imputed health insurance premiums. In our analysis we use state‐level, per‐capita medical malpractice payments as an instrument for imputed premiums. In other words, in order for malpractice payments to be a valid instrument for health insurance premiums, it must be the case that medical malpractice payments _____ with health premiums. It must also be the case that malpractice payments _____ with the unobservable characteristics of workers that might impact the outcome variable. a. are strongly correlated; are not correlated b. are strongly correlated; are strongly correlated c. are not correlated; are not correlated d. are not correlated; are strongly correlated
The following is an excerpt from "The Labor Market Effects of Rising Health Insurance Premiums," by Katherine Baicker, Amitabh Chandra.
If workers in a certain sector of the economy or those who are married are systematically more likely to have different levels of unobservable characteristics that affect health insurance premiums, then such a correlation is possible. This problem is identical to the standard endogeneity problem in program evaluation, where receipt of the treatment is correlated with unobservable characteristics of the person receiving treatment. A solution to this problem is to instrument for imputed premiums using variables that are uncorrelated with εi and mi but are correlated with imputed health insurance premiums. In our analysis we use state‐level, per‐capita medical malpractice payments as an instrument for imputed premiums.
In other words, in order for malpractice payments to be a valid instrument for health insurance premiums, it must be the case that medical malpractice payments _____ with health premiums. It must also be the case that malpractice payments _____ with the unobservable characteristics of workers that might impact the outcome variable.
a. are strongly correlated; are not correlated
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