Public and Private Provision of Information in Market-Based Public Programs: Evidence from Advertising in Health Insurance Marketplaces

This paper studies government and private advertising in market-based public programs. In a model of advertising, we first examine when government advertising increases welfare. Then, we estimate the effects of advertising on consumer demand and assess their welfare effects in the Affordable Care Act health insurance marketplaces. We find government advertising increases overall enrollment and enhances welfare. By contrast, the market expansion effect of private advertising is modest at most. Although private advertising increases demand for insurers in certain specifications, it is not a very efficient tool to induce consumers to select insurers with better plans due to rent-seeking competition. (JEL G22, G52, H51, I13, M37)