Working Papers

Broker Incentives and the Cost of Employer Health Insurance [SSRN Link]

Earlier version titled "Advising Sophisticated Customers: Evidence from Health Insurance Brokers" 

Abstract: Standard economic theory views side payments to intermediaries as agency conflicts that distort advice and harm consumers. This paper challenges that view by showing that, in markets with significant information frictions, such payments can serve as incentives for information acquisition and efficient matching. Using a regulatory change that reduced contingent commissions for major insurance brokers, I find that affected employer health plans experienced premium increases of 8 to 10 percent and declines in plan quality. The premium increase is concentrated among firms with more favorable ex ante risk profiles, consistent with brokers losing incentives to sort clients by risk type and facilitate risk-adjusted pricing, rather than simply extracting rents. The adverse effects are mitigated in firms with stronger corporate governance, in unionized firms, and in more competitive broker markets, where alternative mechanisms partially substitute for the lost incentives. These findings demonstrate that regulations targeting apparent agency conflicts can inadvertently destroy information channels that support efficient pricing.


Fired Up or Burned Down: Wildfires and VC Investment (with Wen Wang and Zhengchu Zhang) [SSRN Link]

Abstract: Using granular data on Californian wildfires and smoke, we examine the behavior of venture capitalists (VCs) and VC-backed startups after such events. We find that VCs are more likely to invest in ESG-oriented startups following wildfires, but decrease their average investment amount. We differentiate the effects of wildfires from smoke, uncovering the underlying mechanism of salience bias and mood effects. For VC-backed startups, we observe an increase in green patent production following wildfires, indicating a shift towards more environmentally friendly innovations. While wildfires do not affect startups' near-future financing opportunities, they pose detrimental effects if encountered during the startups' nascent stage.


Green Products (with Wan-Chien Chiu, Po-Hsuan Hsu, and Kai Li) [SSRN Link]

Abstract: We apply a novel text-based classification procedure to identifying green marks in the USPTO trademark dataset and study the development of environmentally friendly products and services in the U.S. economy over the past forty years. Given the "use in commerce" requirement for trademarks, our data are in a unique position to capture newly commercialized green products and, thus, firms' commitment to environmental protection and sustainability. We first show that manufacturing, energy, and services are the top three sectors in developing green products in the U.S. economy. We next show that firms with more green products are associated with higher environmental ratings and lower greenhouse gas emissions. Moreover, firms' green products are associated with greater future revenue growth and higher firm value. Leveraging the granular textual data in a mark's application, we show that green products are significantly more valueenhancing when they are a firm's core business, are not greenfield, or are introduced together with other non-green products in the same product space. As far as we are aware, we are the first to shed light on whether and how green products help increase sales and firm value. Finally, we provide causal evidence that firms launch green products in response to natural disasters in neighboring counties or their peers' environmental scandals. We conclude that firms' development of green products and services is associated with tangible real environmental outcomes and superior financial performance. 


Retention Costs or Human Capital Investments: A Dual Perspective on Employer-Sponsored Health Benefits (with Xuelin Li) [SSRN Link]

Abstract: Employer-sponsored health insurance is the main source of coverage for U.S. workers, but why firms provide it remains debated. We distinguish two motives: health benefits may help firms retain workers by reducing turnover, or they may improve productivity by investing in worker health. To separate these views, we exploit state-level changes in non-compete agreement (NCA) enforceability. Stronger NCA enforceability reduces employer health plan premiums and shifts coverage toward high-deductible health plans. This shift increases HDHP enrollment and changes health care utilization among affected employees: preventive and routine outpatient visits decline, while high-cost outpatient visits, emergency department visits, and inpatient admissions increase. The evidence supports the retention-cost view and shows that labor-mobility restrictions affect nonwage compensation and employee health risk.