essays in public finance and industrial organization a dissertation ...

CHAPTER 1. BANKRUPTCY 62
Table 1.11: Policy Counterfactuals
Penalty Take-up ! WTP ! Cost ! Surplus
Pigovian penalty
Low risk aversion $218.21 7.5% $10.02 $6.06 $3.95
Moderate risk aversion $218.21 7.3% $11.02 $6.83 $4.19
High risk aversion
PPACA penalty
$218.21 7.9% $12.30 $7.72 $4.58
Low risk aversion $481.43 63.6% -$7.38 $5.34 -$12.72
Moderate risk aversion $481.43 56.4% $3.02 $14.40 -$11.38
High risk aversion
Medical debt non-dischargeable
$481.43 49.7% $11.09 $20.24 -$9.15
Low risk aversion n/a 100.0% -$48.26 -$12.12 -$36.14
Moderate risk aversion n/a 100.0% -$28.18 $12.75 -$40.93
High risk aversion n/a 100.0% -$6.43 $36.74 -$43.17
Notes: Micro-simulation estimates of insurance take-up, willingness to pay, costs, and social surplus
from different penalty systems relative to a baseline in which households can choose bankruptcy at no
cost. The Pigovian penalty is the household-specific social cost of the implicit insurance from bankruptcy.
PPACA is the inflation-adjusted, fully phased-in penalty under this legislation, defined as the greater of
$625 or 2.5 percent of income, up to a maximum of $2,085 per household. Medical debt nondischargeable
exposes households to the full financial risk when uninsured. Take-up is the percent of
uninsured individuals that take up coverage. Willingness to pay (WTP) is calculated using CARA utility
with parameters of 2.5 x 10^-5 (low risk aversion), 5.0 x 10^-5 (moderate risk aversion), and 7.5 x
10^-5 (high risk aversion). Household-level estimates weighted by number of individuals per household
for interpretation at the individual level.