nep-ias New Economics Papers
on Insurance Economics
Issue of 2005‒03‒13
three papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Consumption inequality and partial insurance By Richard Blundell; ; Luigi Pistaferri; Ian Preston
  2. Borrowing constraints, the cost of precautionary saving and unemployment insurance By ; Thomas Crossley; Hamish Low
  3. Social Interaction and the Health Insurance Choices of the Elderly By Eldar Beiseitov; Jeffrey D. Kubik; John R. Moran

  1. By: Richard Blundell (Institute for Fiscal Studies and University College London); ; Luigi Pistaferri; Ian Preston (Institute for Fiscal Studies and University College London)
    Abstract: This paper describes the transmission of income inequality into consumption inequality and in so doing investigates the degree of insurance to income shocks. It combines panel data on income from the PSID with consumption data from repeated CEX cross-sections and distinguishes between permanent and transitory income shocks. We find some partial insurance of permanent income shocks with more insurance possibilities for the college educated and those nearing retirement. We find little evidence against full insurance for transitory income shocks except among low income households. Tax and welfare benefits are found to play an important role in insuring permanent shocks. Adding durable expenditures to the consumption measure suggests that durable replacement is an important insurance mechanism, especially for transitory income shocks.
    Date: 2004–11
  2. By: ; Thomas Crossley; Hamish Low (Institute for Fiscal Studies and Trinity College, Cambridge)
    Abstract: Job losers exhibit significant heterogeneity in wealth holdings and in the marginal propensity to consume transitory income. We consider potential sources of this heterogeneity, whether (some of) the unemployed face borrowing constraints, and the implications of this heterogeneity for unemployment insurance. We show theoretically how the optimal benefit can depend significantly on borrowing constraints, and on other (non- precautionary) savings motives. We report empirical evidence that (i) a quarter of job losers cannot borrow for current consumption, (ii) this constraint is binding for a much smaller fraction, and (iii) that \'excess sensitivity\' is not limited to the constrained.
    Date: 2005–01
  3. By: Eldar Beiseitov (Department of Economics, Maxwell School, Syracuse University); Jeffrey D. Kubik (Center for Policy Research, Maxwell School, Syracuse University); John R. Moran (Center for Policy Research, Maxwell School, Syracuse University)
    Abstract: Using data from the 1998 wave of the Health and Retirement Study, we examine the effect of social interactions on the health insurance choices of the elderly. We find that having more social interactions, as measured by contacts with friends and neighbors, reduces the likelihood of enrolling in a Medicare managed care plan relative to purchasing a medigap policy or having coverage through Medicare alone. Our estimates indicate that social networks are an important determinant of the health insurance choices of the elderly and provide suggestive evidence that "word-of-mouth" information sharing may have played a role in the preference of some seniors for traditional indemnity insurance over managed care.
    JEL: I11 J14
    Date: 2004–05

This nep-ias issue is ©2005 by Soumitra K Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.