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on Insurance Economics |
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Issue of 2007‒01‒13
twenty-one papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Bhat Ramesh; Jain Nishant |
| Abstract: | Health insurance policies are generally one-year policies and to remain part of the insurance poll, policyholders are required to renew their policies each year. Understanding the factors that affect the demand and renewal decisions to continue in health insurance programme is imperative for future growth and development of the insurance sector. We extend our previous work on factors affecting the decision to purchase health insurance to understand the factors affecting the renewal of insurance policy. We find the factors affecting health insurance renewal are not the same as factors affecting health insurance purchase decision. This has implications for insurance providers. The study also suggests customer satisfaction as an important factor influencing the renewal decision of policyholder. |
| Date: | 2007–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2007-01-02&r=ias |
| By: | Karsten Jeske; Sagiri Kitao (Economics New York University) |
| Abstract: | The U.S. tax policy on health insurance favors only those offered group insurance through their employers, and is highly regressive since the subsidy takes the form of deductions from the progressive income tax system. The paper investigates alternatives to the current policy. We find that a complete removal of the subsidy results in a significant reduction in the insurance coverage and serious welfare deterioration. There is, however, room for improving welfare and raising the coverage, by eliminating regressiveness in the group insurance subsidy and by extending refundable credits to the private insurance market. Our work is the first in highlighting the importance of studying health policy in a general equilibrium framework with an endogenous demand for the health insurance. We use the Medical Expenditure Panel Survey (MEPS) to calibrate the process for income, health expenditure shocks and health insurance offer status through employers and succeed in producing the pattern of insurance demand as observed in the data, which serves as a solid benchmark for the policy experiments |
| Keywords: | Income taxation, health insurance, heterogeneous agents |
| JEL: | H20 H31 E62 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:57&r=ias |
| By: | Christian Laux (Frankfurt University and CFS); Alexander Muermann (University of Pennsylvania, The Wharton School) |
| Abstract: | Mutual insurance companies and stock insurance companies are different forms of organized risk sharing: policyholders and owners are two distinct groups in a stock insurer, while they are one and the same in a mutual. This distinction is relevant to raising capital, selling policies, and sharing risk in the presence of financial distress. Up-front capital is necessary for a stock insurer to offer insurance at a fair premium, but not for a mutual. In the presence of an ownermanager conflict, holding capital is costly. Free-rider and commitment problems limit the degree of capitalization that a stock insurer can obtain. The mutual form, by tying sales of policies to the provision of capital, can overcome these problems at the potential cost of less diversified owners. |
| Keywords: | Ownership Structure, Insurance, Qwner-Manager Conflict, Capital, Default |
| JEL: | G22 G32 |
| Date: | 2006–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp2000626&r=ias |
| By: | Melvyn Coles; Adrian Masters (State University of New York Albany) |
| Abstract: | In the context of a standard equilibrium matching framework, this paper considers how a duration dependent unemployment insurance (UI) system affects the dynamics of unemployment and wages in an economy subject to stochastic job-destruction shocks. It establishes that re-entitlement effects induced by a finite duration UI program generate intertemporal transfers from firms that hire in future booms to firms that hire in current recessions. These transfers imply a net hiring subsidy in recessions which stabilizes unemployment levels over the cycle |
| Keywords: | Matching frictions, Unemployment, Duration Dependent UI. |
| JEL: | J63 J64 J65 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:189&r=ias |
| By: | Arena, Marco |
| Abstract: | Insurance market activity, both as a financial intermediary and a provider of risk transfer and indemnification, may contribute to economic growth by allowing different risks to be managed more efficiently and by mobilizing domestic savings. During the past decade, there has been faster growth in insurance market activity, particularly in emerging markets given the process of liberalization and financial integration, which raises questions about its impact on economic growth. The author tests whether there is a causal relationship between insurance market activity (life and nonlife insurance) and economic growth. Using the generalized method of moments for dynamic models of panel data for 56 countries and for the 1976-2004 period, he finds robust evidence of a causal relationship between insurance market activity and economic growth. Both life and nonlife insurance have a positive and significant causal effect on economic growth. High-income countries drive the results in the case of life insurance. On the other hand, both high-income and developing countries drive the results in the case of nonlife insurance. |
| Keywords: | Insurance & Risk Mitigation,Economic Theory & Research,Banks & Banking Reform,Financial Intermediation,Non Bank Financial Institutions |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4098&r=ias |
| By: | Gouta Akiyama (Mitsui Asset Trust and Banking Company,Limited); Naoto Kunitomo (Faculty of Economics, University of Tokyo) |
| Abstract: | Recently the various types of the equity-linked insurance have been introduced and actively traded in Japanese insurance markets. We investigate the basic problems of the actuarial risk management methods for those products based on the Markovian regime-switching time series model, which was originally proposed by Hamilton (1989) and applied to the insurance problem by Hardy (2001, 2003). We argue that they should be carefully used in Japan mainly because the macro-economic performance of Japan in the past decades have been quite different from the macro-economies of Canada and U.S.. |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2005cj141&r=ias |
| By: | Yasushi Iwamoto (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper proposes the social insurance contribution rule that is based on a unified framework. It also discusses a desirable direction of reform. If the rule is based on that of private insurance, the contribution should be related to benefits. When a policy purpose requires mandatory enrollment, however, the insurance should take either of the following two schemes: (1) it reduces a burden of a low-ability-to-pay person, and revenue loss is subsidized by tax revenue, or (2) the contribution is related to the person's ability to pay, and the social insurance conducts income redistribution inside it. The latter has more similarity with the existing rule. Therefore, the unequal burden on different sources of income should be eliminated as soon as possible, and then the contribution should apply the ability-to-pay principle. Since the social insurance is engaged in income redistribution, government subsidies financed with taxes can be replaced by social insurance premiums. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2006cj162&r=ias |
| By: | Yasushi Iwamoto (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper proposes the social insurance contribution rule that is based on a unified framework. It also discusses a desirable direction of reform. If the rule is based on that of private insurance, the contribution should be related to benefits. When a policy purpose requires mandatory enrollment, however, the insurance should take either of the following two schemes: (1) it reduces a burden of a low-ability-to-pay person, and revenue loss is subsidized by tax revenue, or (2) the contribution is related to the person's ability to pay, and the social insurance conducts income redistribution inside it. The latter has more similarity with the existing rule. Therefore, the unequal burden on different sources of income should be eliminated as soon as possible, and then the contribution should apply the ability-to-pay principle. Since the social insurance is engaged in income redistribution, government subsidies financed with taxes can be replaced by social insurance premiums. |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:tky:jseres:2006cj163&r=ias |
| By: | Jiří Hlavácek (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Prague, Czech Republic) |
| Abstract: | Czech laws on Deposit Guarantee-Schemes are characterized. It is described history of rise of the Czech Deposit Insurance Fund and dynamics of its basic characteristics. Czech deposit guarantee system is compared with the European system and with the European Directive on Deposit Guarantee-Schemes. It is calculated the effective rate of “taxation” by the compulsory payment to Czech Deposit Insurance Fund, which is (because of the very low interest rates in the Czech Republic) extremely high (about 30 – 40 %). Recommendations: 1) legislatively prevent politics from controlling the (private) financial funds in the system, 2) discard the audited firms from the Deposit Guarantee-Scheme and 3) decrease the amounts compulsorily paid by banks for deposits of small clients (deposits of households). |
| Keywords: | Deposit Insurance; the Czech Deposit Insurance Fund; the European Directive on Deposit Guarantee-Schemes |
| JEL: | E53 C10 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2006_26&r=ias |
| By: | Yasushi Iwamoto (Faculty of Economics, University of Tokyo); Miki Kohara (Osaka School of International Public Policy, Osaka University); Makoto Saito (Faculty of Economics, Hitotsubashi University) |
| Abstract: | Using micro-level household data in the 2001 Comprehensive Survey of the Living Conditions of the People on Health and Welfare as compiled by the Japanese Ministry of Health, Labor and Welfare, this paper examines how having a household member in need of long-term nursing care can result in welfare losses measured in terms of consumption. In doing so, the study evaluates the role of the public long-term care insurance scheme implemented in Japan in April 2000. The results indicate that when households included a disabled family member, household consumption net of long-term care costs did not decrease as much as before the introduction of long-term care insurance. When compared with the surveys conducted in 1995 and 1998, the adverse effects on consumption net of long-term care costs have became much weaker. These findings suggest that the introduction of social insurance in 2000 helped to reduce the welfare loss associated with having a disabled family member. |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2006cf443&r=ias |
| By: | Mahul, Olivier; Gurenko, Eugene |
| Abstract: | The authors propose a financial model to address the design of efficient risk financing strategies against natural disasters at the country level. It is simple enough to shed analytical light on some of the key issues but flexible and realistic enough to provide some quantitative guidance on the ex ante financing of catastrophic losses. The risk financing problem is decomposed into two steps. First, the resource gap, defined as the difference between losses and available ex-post resources (such as post-disaster aid), is identified. It determines the losses to be financed by ex ante financial instruments (reserves, catastrophe insurance, and contingent debt). Second, the cost-minimizing financial arrangements are derived from the marginal costs of the financial instruments. The model is solved through a series of graphical analyses that make this complex financial problem easier to apprehend. This model captures and explains the main impacts of financial parameters (such as insurance premium, cost of capital) on efficient risk financing structures. |
| Keywords: | Insurance & Risk Mitigation,Banks & Banking Reform,Financial Intermediation,Natural Disasters,Non Bank Financial Institutions |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4075&r=ias |
| By: | Tomoyuki Nakajima (Kyoto University) |
| Abstract: | We consider an efficiency-wage model with the Calvo-type sticky prices and analyze optimal monetary policy when unemployment insurance is not perfect. With imperfect risk sharing, strict zero-inflation policy is no longer optimal even if the zero-inflation steady-state equilibrium is assumed to be (conditionally) efficient. Quantitative result depends on how idiosyncratic earning losses, measured by the (inverse of the) relative income of the unemployed to the employed, vary over business cycles. If idiosyncratic income losses are acyclical, optimal policy differs very little from the zero-inflation policy. However, if they vary countercyclically, as evidence suggests, the deviation of optimal policy from complete price stabilization becomes quantitatively significant. Furthermore, optimal policy in such a case involves stabilization of output to a much larger extent |
| Keywords: | optimal monetary policy, efficiency wage, unemployment, nominal rigidities |
| JEL: | E3 E5 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:231&r=ias |
| By: | Winand Emons |
| Abstract: | We consider successive generations of non-altruistic individuals carrying a good or bad gene. Daughters are more likely to carry their mother's gene than the opposite one. Competitive insurers can perform a genetic test revealing an agent's gene. They may condition their quotes on the agent's or on her ancestors' genetic status. In equilibrium generation one is bribed to take the test with an unconditional quote. The insurer uses this information to profitably screen a finite number of generations of their offspring. The offspring of good gene carriers subsidize the tested generation |
| Keywords: | genetic tests; insurance; screening; pooling |
| JEL: | D82 G22 |
| Date: | 2006–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp0605&r=ias |
| By: | Satyajit Chatterjee (Research Federal Reserve Bank of Philadelphia); Dean Corbae; Jose-Victor Rios-Rull |
| Abstract: | We propose a theory of unsecured debt that is based on the existence of private information about a person's type and on the fact that some debtors have the incentive to forego bankruptcy in order to signal their type. The theory formalizes the idea that the type of a person is relevant to trading partners in many exchange situations and by resisting opportunistic behavior in one exchange context, a person may signal valuable information about his type to trading partners in other exchange contexts. In the model, by resisting opportunistic behavior in the credit market borrowers can signal their type to the insurance market. The model is consistent with the observation that insurers use credit scores to predict the likelihood of a person filing insurance claims. |
| Keywords: | Adverse Selection, Insurance, Credit Scores, Default Risk |
| JEL: | G12 D52 D82 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:781&r=ias |
| By: | Lindbeck, Assar (Research Institute of Industrial Economics) |
| Abstract: | This paper applies a systems-oriented, “holistic” approach to China’s radical economic reforms during the last quarter of a century. It characterizes China’s economic reforms in terms of a multidimensional classification of economic systems. When looking at the economic consequences of China’s change of economic system, I deal with both the impressive growth performance and its economic costs. I also study the consequences of the economic reforms for the previous social arrangements in the country, which were tied to individual work units: agriculture communes, collective firms and state-owned enterprises. I continue with the social development during the reform period, reflecting a complex mix of social advances, mainly in terms of poverty reduction, and regress for large population groups in terms of income security and human services, such as education and, in particular, health care. Next, I discuss Chinas future policy options in the social field, whereby I draw heavily on relevant experiences in developed countries over the years. The future options are classified into three broad categories: policies influencing the level and distribution of factor income, income transfers including social insurance, and the provision of human services. |
| Keywords: | China; Transition Economies; Social Insurance; Human Services |
| JEL: | I18 I19 I38 O53 P30 |
| Date: | 2006–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0681&r=ias |
| By: | Lindbeck, Assar (Research Institute of Industrial Economics) |
| Abstract: | I discuss the nature of the economic reforms in China during the last quarter of a century in the context of a typology of economic systems, emphasizing the interaction between economic and social mechanisms. I also consider China’s options for further reforms. I focus on economic reforms that make the growth path less resource demanding and social reforms that enhance income security and improve education and health care for disadvantaged population groups. |
| Keywords: | China; Transition Economies; Social Insurance; Human Services |
| JEL: | I18 I19 I38 O53 P30 |
| Date: | 2006–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0680&r=ias |
| By: | Wagstaff, Adam |
| Abstract: | Social health insurance (SHI) is enjoying something of a revival in parts of the developing world. Many countries that have in the past relied largely on tax finance (and out-of-pocket payments) have introduced SHI, or are thinking about doing so. And countries with SHI already in place are making vigorous efforts to extend coverage to the informal sector. Ironically, this revival is occurring at a time when the traditional SHI countries in Europe have either already reduced payroll financing in favor of general revenues, or are in the process of doing so. This paper examines how SHI fares in health care delivery, revenue collection, covering the formal sector, and its impacts on the labor market. It argues that SHI does not necessarily deliver good quality care at a low cost, partly because of poor regulation of SHI purchasers. It suggests that the costs of collecting revenues can be substantial, even in the formal sector where nonenrollment and evasion are commonplace, and that while SHI can cover the formal sector and the poor relatively easily, it fares badly in terms of covering the nonpoor informal sector workers until the economy has reached a high level of economic development. The paper also argues that SHI can have negative labor market effects. |
| Keywords: | Health Monitoring & Evaluation,Health Economics & Finance,Public Sector Economics & Finance,Labor Markets,Health Systems Development & Reform |
| Date: | 2007–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4111&r=ias |
| By: | Lars Ljungqvist (DEPT OF ECONOMICS STOCKHOLM SCHOOL OF ECONOMICS); Thomas J. Sargent |
| Abstract: | We first scrutinize and challenge Prescott's (2002, 2004) quantitative analysis of the role of differences in taxes in explaining cross-country differences in labor market outcomes, and then defend an alternative model that assigns an important role to cross-country differences in social unemployment insurance institutions that Prescott argues can be safely ignored. In the process, we explore how the assumption of indivisible labor interacts with assumptions regarding the (in)completeness of financial markets and any frictions in the labor market, to determine the labor supply elasticity. |
| Keywords: | Employment lotteries, indivisible labor, labor supply elasticity, taxation, unemployment, unemployment insurance |
| JEL: | E24 J64 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:734&r=ias |
| By: | John Quigley (University of California, Berkeley) |
| Abstract: | This paper reviews the evolution of the major credit and insurance programs undertaken by the US government in support of urban housing. As the review makes clear, the FHA, VA, FNMA, and FHLMC have played major roles in the development of liberal and efficient primary and secondary mortgage markets in the US. The development of capacity in mortgage lending and securitization in the private sector does suggest, however, that federally subsidizing mortgage market activities can be restrained with little effect upon homeownership, the principal rationale for federal activity. In particular, the orderly reduction in the mortgage investment activities of the GSEs and the imposition of guarantee fees upon MBS insured by the GSEs are first steps in restraining federal activity. More generally, a concentration of FHA and GSE activity on first-time homebuyers would reduce federal risk exposure while preserving the economic rationale for government activity. |
| Date: | 2006–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:bphupl:1074&r=ias |
| By: | Dhillon, Amrita; Rigolini, Jamele |
| Abstract: | The authors examine how institutions that enforce contracts between two parties-producers and consumers-interact in a competitive market with one-sided asymmetric information and productivity shocks. They compare an informal enforcement mechanism, reputation, the efficacy of which is enhanced by consumers investing in " connectedness, " with a formal mechanism, legal enforcement, the effectiveness of which can be reduced by producers by means of bribes. When legal enforcement is poor, consumers connect more with one another to improve informal enforcement. In contrast, a well-connected network of consumers reduces producers ' incentives to bribe. In equilibrium, the model predicts a positive relationship between the frequency of productivity shocks, bribing, and the use of informal enforcement, providing a physical explanation of why developing countries often fail to have efficient legal systems. Firm-level estimations confirm the partial equilibrium implications of the model. |
| Keywords: | Economic Theory & Research,Insurance & Risk Mitigation,Markets and Market Access,Business Environment,Business in Development |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4090&r=ias |
| By: | Christine Hauser (Economics University of Rochester); Gokce Uysal |
| Abstract: | We study a model of efficient risk sharing between two agents, A and B, who enjoy a non-durable common good. Only agent B can provide the common good whereas agent A can merely contribute indirectly by making transfers to the provider, agent B. We consider self-enforcing equilibria in the absence of commitment. We characterize the Pareto frontier of the subgame perfect equilibrium payoffs. The main results are: First, the consumption of the public good is significantly more stable than are the private consumptions. Second, in the absence of aggregate uncertainty, agents' consumptions are invariant to distribution of income in most cases. In the remaining cases, private consumptions and continuation values covary positively with respective incomes. Third, if some first best allocation is sustainable, the long-term equilibrium converges to the first best allocation. Otherwise, agents' utilities oscillate over a finite set of values. We find that an increase in the provider's deviation lifetime utility shifts the frontier of the set of subgame perfect equilibrium payoffs to exclude the lowest values of the provider (hence the highest values of the other). A decrease in the provider's deviation lifetime utility shifts the frontier of the set to include lower values for the provider (hence higher values for the other) |
| Keywords: | mutual insurance, lack of commitment, optimal dynamic contract, public good |
| JEL: | C72 C73 D90 |
| Date: | 2006–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed006:860&r=ias |