Congratulations to MIT’s Amy Finkelstein for being named this year’s winner of the John Bates Clark medal in economics. The award committee cited Finkelstein’s 2004 article in the Journal of Political Economy, “Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market” in their prize announcement.
The research finds evidence that asymmetric information affects the way people buy annuity products. Annuities are designed to insure people against outliving their resources. If a person buying an annuity has information about their mortality risk that the seller doesn't have, it may change the types of annuity products they choose to buy (adverse selection).
"All else equal, annuitants who are longer-lived select annuities with back-loaded payment streams," Finkelstein and her co-author James Poterba wrote. "Similarly, annuitants who are shorter-lived select annuities that make payments to the annuitant's estate in the event of an early death."
"Our results are consistent not only with individuals' having private mortality information but also with individuals' using this information in making annuity purchase decisions."
The article is available open-access here: http://www.jstor.org/stable/10.1086/379936.
The John Bates Clark medal was awarded biennially from 1947-2009 to that American economist under the age of forty who is judged to have made the most significant contribution to economic thought and knowledge. From 2010 forward, the Clark Medal will be awarded annually. The Medal winner is announced in April.
For more information on the award visit: http://www.aeaweb.org/honors_awards/clark_medal.php. Amy Finkelstein's bio is available here: http://economics.mit.edu/faculty/afink.
Amy Finkelstein and James Poterba, "Adverse Selection in Insurance Markets: Policyholder Evidence from the U.K. Annuity Market." Journal of Political Economy 112:1 (February 2004)
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