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on Insurance Economics |
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Issue of 2006‒10‒07
three papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Facundo Sepulveda |
| Abstract: | When the government cannot commit to withdraw from providing charity health care, as is the case when it faces the Samaritan's Dilemma, a pub- lic health insurance scheme can be Pareto improving. However, the large heterogeneity in the design of such schemes observed around the world begs the question of what characterizes the optimal public health insurance plan. In this paper, we examine the distortions created by three plans, nested in terms of the constraints they place on the individual's decision problem. We ¯nd that linking public health insurance bene¯ts to the use of a certain type of health care, such as treatment in public hospitals, creates incentives against the e±cient use of higher quality health care. When such constraint is lifted, but the public insurance scheme still determines a minimum level of coverage for each illness, ¯rst best e±ciency is achieved. It turns out that placing constraints in the form of minimum levels of coverage for each illness is necessary for e±ciency. Removing such constraint decreases the relative price of high quality care for a subset of illnesses, and leads to too much high quality care used in equilibrium. This analysis suggests that the widespread practice of determining illness by illness coverage in public health insurance systems has an e±ciency rationale, despite the administrative and informational di±culties that it entails. |
| Keywords: | Samaritan's Dilemma, Health insurance. |
| JEL: | H21 I18 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:536&r=ias |
| By: | Eytan Sheshinski |
| Abstract: | Regular annuities provide payment for the duration of an owner's lifetime. Period-Certain annuities provide additional payment after death to a beneficiary provided the insured dies within a certain period after annuitization. It has been argued that the bequest option offered by the latter is dominated by life insurance which provides non-random bequests. This is correct if competitive annuity and life insurance markets have full information about individual longevities. In contrast, this paper shows that when individual longevities are private information, a competitive pooling equilibrium which offers annuities at common prices to all individuals may have positive amounts of both types of annuities in addition to life insurance. In this equilibrium, individuals self-select the types of annuities that they purchase according to their longevity prospects. The break-even price of each type of annuity reflects the average longevity of its buyers. The broad conclusion that emerges from this paper is that adverse-selection due to asymmetric information is reflected not only in the amounts of insurance purchased but, importantly, also in the choice of insurance products suitable for different individual characteristics. This con- clusion is supported by recent empirical work about the UK annuity market (Finkelstein and Poterba (2004)). |
| Keywords: | Annuities; Period-Certain Annuities; Pooling Equilibrium |
| JEL: | D11 D82 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp433&r=ias |
| By: | Thomas J. Kniesner (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020); W. Kip Viscusi; Christopher Woock; James P. Ziliak |
| Abstract: | Our research addresses fundamental long-standing concerns in the compensating wage differentials literature and its public policy implications: the econometric properties of estimates of the value of statistical life (VSL) and the wide range of such estimates from about $0.5 million to about $21 million. We address most of the prominent econometric issues by applying panel data, a new and more accurate fatality risk measure, and systematic selection of panel estimator in our research. Controlling for measurement error, endogeneity, individual heterogeneity, and state dependence yields both a reasonable average level and narrow range for the estimated value of a statistical life of about $5.5-$7.5 million. |
| JEL: | J17 I12 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:max:cprwps:85&r=ias |