Empirical contract theory: The case of insurance data

While contract theory has reached a high degree of sophistication, econometric applications remain scarse. One often invoked reason is that adequate data is hard to find. We argue that insurance data fit especially well the requirements of econometric testing. Then we propose some insights on how insurance data can be used to test the predictions of contract theory. As an illustration, we present some preliminary empirical results relative to the existence of adverse selection of the Rothschild and Stiglitz type in automobile insurance. (C) 1997 Elsevier Science B.V.