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on Insurance Economics |
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Issue of 2006‒07‒09
seven papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | W. Kip Viscusi; Patricia Born |
| Abstract: | Natural catastrophes often have catastrophic risks on insurance companies as well as on the insured. Using a very large dataset on homeowners’ insurance coverage by state, by firm, and by year for the 1984 to 2004 period, this paper documents the positive effect on losses and loss ratios of both unexpected catastrophes as well as large events that the authors term “blockbuster catastrophes.” Insurers adapt to these catastrophic risks by raising insurance rates, leading to lower loss ratios after the catastrophic event. There is a widespread event of unexpected catastrophes and blockbuster catastrophes that reduces total premiums earned in the state, reduces the total number writing insurance coverage in the state, and leads to the exit of firms from the state. Firms with low levels of homeowners’ premiums are most adversely affected by the catastrophes. |
| JEL: | D8 G22 K13 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12348&r=ias |
| By: | Eduardo Levy Yeyati |
| Abstract: | Unlike the financial dollarization (FD) of external liabilities, the dollarization of domestic financial assets (domestic FD) has received comparatively less attention until very recently, when it has been increasingly seen as a key source of balance sheet exposure. This paper focuses on a complementary –and often overlooked– angle of domestic FD: the limit it imposes on the central bank as domestic lender of last resort, and the resulting exposure to dollar liquidity runs. The paper discusses the incidence of FD on banking crisis propensity, shows that FD has been an important motive for self insurance in the form of international reserves, and highlights the moral hazard associated with centralized reserve accumulation. Next, it illustrates the authorities’ belated recourse to suspension of convertibility in two recent banking crises (Argentina 2001 and Uruguay 2002). Finally, it argues for a combined scheme of decentralized reserves (liquid asset requirements on individual banks) to limit moral hazard, and an ex-ante suspension-of-convertibility clause (“circuit breakers”) to reduce self-insurance costs while limiting bank losses in the event of a run. |
| JEL: | G2 F3 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12345&r=ias |
| By: | Ours,Jan C. van; Vodopivec,Milan (Tilburg University, Center for Economic Research) |
| Abstract: | This paper investigates how the potential duration of unemployment benefits affects the quality of post-unemployment jobs. It takes advantage of a natural experiment introduced by a change in Slovenia's unemployment insurance law that substantially reduced the potential benefit duration. Although this reduction strongly increased job finding rates, the quality of the postunemployment jobs remained unaffected: the paper finds that the law change had no effect on either the type of the contract (temporary vs. permanent), the duration of the post-unemployment jobs, or the wage earned in this job. |
| Keywords: | Unemployment insurance;potential benefit duration;job separation rates; post-unemployment wages |
| JEL: | C41 H55 J64 J65 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200656&r=ias |
| By: | Tressel, Thierry; Detragiache, Enrica; Demirguc-Kunt, Asli |
| Abstract: | This paper studies whether compliance with the Basel Core Principles for Effective Banking Supervision (BCP) improves bank soundness. BCP compliance assessments provide a unique source of information about the quality of bank supervision and regulation around the world. The authors find a significant and positive relationship between bank soundness (measured with Moody ' s financial strength ratings) and compliance with principles related to information provision. Specifically, countries that require banks to report regularly and accurately their financial data to regulators and market participants have sounder banks. This relationship is robust to controlling for broad indexes of institutional quality, macroeconomic variables, sovereign ratings, as well as reverse causality. Measuring soundness through z-scores yields similar results. The findings emphasize the importance of transparency in making supervisory processes effective and strengthening market discipline. Countries aiming to upgrade banking regulation and supervision should consider giving priority to information provision over other elements of the Core Principles. |
| Keywords: | Banks & Banking Reform,Financial Intermediation,Corporate Law,Financial Crisis Management & Restructuring,Insurance & Risk Mitigation |
| Date: | 2006–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3954&r=ias |
| By: | Tomi Kyyrä; Ralf Wilke |
| Abstract: | In Finland the elderly unemployed are allowed to collect unemployment benefits up to the age of 60, when they can retire via a particular unemployment pension. In 1997 the eligibility age of persons benefiting from this scheme was raised from 53 to 55. We consider layo risks, unemployment durations, and the exit states before and after the reform. In the duration analysis a flexible treatment design is adopted by allowing for quantile treatment eects. We apply three dierent non- and semiparametric methods, which all produce robust and coherent results. Since the reform the group aged 53-54 has had a lower risk of unemployment, shorter unemployment durations, and higher exit rates to employment, and it is no longer distinguishable from the group aged 50-52. We compute the expected saving in unemployment benefits in the private sector due to the reform and find that it is in the range of 100 million euros per age cohort. |
| Keywords: | Unemployment insurance reform, quantile treatment effect, non- and semiparametric methods, Finnish register data. |
| JEL: | J60 J14 C14 |
| Date: | 2004–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:fer:dpaper:346&r=ias |
| By: | José J. Escarce; Arvind K. Jain; Jeannette Rogowski |
| Abstract: | This study assessed the effect of hospital competition and HMO penetration on mortality after hospitalization for six medical conditions in California, New York, and Wisconsin. We used linked hospital discharge and vital statistics data to study adults hospitalized for myocardial infarction, hip fracture, stroke, gastrointestinal hemorrhage, congestive heart failure, or diabetes. We estimated logistic regression models with death within 30 days of admission as the dependent variable and hospital competition, HMO penetration, and hospital and patient characteristics as explanatory variables. Higher hospital competition was associated with lower mortality in California and New York, but not Wisconsin. In addition, higher HMO penetration was associated with lower mortality in California, but higher mortality in New York. In the context of the study states’ history with managed care, these findings suggest that hospitals in highly competitive markets compete on quality even in the absence of mature managed care markets. The findings also underscore the need to consider geographic effects in studies of market structure and hospital quality. |
| JEL: | I1 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12335&r=ias |
| By: | Pekka Sinko |
| Abstract: | The study consists of four essays, which analyse the implications of labour taxation and unemployment insurance (UI) in the models of imperfectly competitive labour markets. The first essay studies the effects of labour taxation on unemployment and efficiency in a search equilibrium model with endogenous job destruction. It is shown that the adverse employment effect of labour taxes is mainly due to the prolonged spells of unemployment. A pure increase in the tax progression may reduce unemployment and facilitate the emergence of low-productivity jobs. In the second essay, the link between taxes and the public benefits is perceived owing to the centralised wage setting institutions. This is shown to promote wage moderation, make wages and employment less sensitive to wage taxation and reduce hours worked. The third essay considers alternative ways to organize the government subsidies in a model, where taxalike payments are collected by the industry level funds in order to finance unemployment benefits. It is shown that equilibrium unemployment is decreasing in the share of UI financed by the employed union members. The fourth essay analyses the effects of UI in a job search model with endogenous search effort. It is shown that UI with a limited potential duration induces more search effort among the long-term unemployed who have exhausted a considerable amount of the current benefits. |
| Keywords: | Labour taxation, unemployment insurance, trade union model, search model |
| JEL: | E24 J50 J30 H20 |
| Date: | 2004–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:fer:resrep:111&r=ias |