May 1, 2012
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 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.
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)
One of the oldest and most prestigious journals in economics, the Journal of Political Economy has since 1892 presented significant research and scholarship in economic theory and practice. The journal aims to publish highly selective, widely cited articles of current relevance that will have a long-term impact on economics research. JPE's analytical, interpretive, and empirical studies in a number of areas - including monetary theory, fiscal policy, labor economics, development, micro- and macroeconomic theory, international trade and finance, industrial organization, and social economics - are essential reading for all economists wishing to keep up with substantive new research in the discipline.