nep-ias New Economics Papers
on Insurance Economics
Issue of 2007‒09‒16
five papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Agro-biodiversity as natural insurance and the development of financial insurance markets By Stefan Baumgärtner; Martin F. Quaas
  2. On the Preference for Full-Coverage Policies: Why do People buy too much Insurance? By Zur Shapira; Itzhak Venezia
  3. Insurance for the Poor: The Case of Informal Insurance Groups in Benin By Philippe LeMay-Boucher
  4. Prescription Drug Coverage and Elderly Medicare Spending By Baoping Shang; Dana P. Goldman
  5. A Positive Theory of the Earnings Relationship of Unemployment Benefits By Laszlo Goerke; Markus Pannenberg; Heinrich W. Ursprung

  1. By: Stefan Baumgärtner (Centre for Sustainability, University of Lüneburg); Martin F. Quaas (Department of Ecological Modelling, UFZ-Centre for Environmental Research Leipzig-Halle)
    Abstract: Agro-biodiversity can provide natural insurance to risk averse farmers. We employ a conceptual ecological-economic model to analyze the choice of agrobiodiversity by risk averse farmers who have access to financial insurance. We study the implications for individually and socially optimal agro-ecosystem managementand policy design when on-farm agro-biodiversity, through ecosystem processes at higher hierarchical levels, generates a positive externality on other farmers. We show that for the individual farmer natural insurance from agro-biodiversty and financial insurance are substitutes. While an improved access to financial insurance leads to lower agro-biodiversity, the eects on the market failure problem (due to the external benefits of on-farm agro-biodiversity) and on welfare are determined by properties of the agro-ecosystem and agro-biodiversity’s external benefits. We derive a specific condition on agro-ecosystem functioning under which, if financial insurance becomes more accessible, welfare in the absence of regulation increases or decreases.
    Keywords: agro-biodiversity, ecosystem services, agro-ecosystem management, insurance, risk-aversion, uncertainty
    JEL: Q1 Q57 H23 D62
    Date: 2007–09–12
  2. By: Zur Shapira; Itzhak Venezia
    Date: 2007–09–03
  3. By: Philippe LeMay-Boucher
    Abstract: This paper studies indigenous insurance groups using evidence from urban areas in Benin. Many of these informal institutions co-exist within neighbourhood-distance. They are based on well-defined rules and regulations, offering premium-based insurance for funeral expenses, as well as other forms of insurance and credit to cope with hardships. We provide first a description of these groups. Then we investigate, with the help of an original dataset, which individual characteristics are significant in explaining both the probability to join such groups and the choice of insurance coverage.
    Keywords: groups, insurance, Benin
    JEL: O17 O18 C21
    Date: 2007
  4. By: Baoping Shang; Dana P. Goldman
    Abstract: The introduction of Medicare Part D has generated interest in the cost of providing drug coverage to the elderly. Of paramount importance -- often unaccounted for in budget estimates -- are the salutary effects that increased prescription drug use might have on other Medicare spending. This paper uses longitudinal data from the Medicare Current Beneficiary Survey (MCBS) to estimate how prescription drug benefits affect Medicare spending. We compare spending and service use for Medigap enrollees with and without drug coverage. Because of concerns about selection, we use variation in supply-side regulations of the individual insurance market -- including guaranteed issue and community rating -- as instruments for prescription drug coverage. We employ a discrete factor model to control for individual-level heterogeneity that might induce bias in the effects of drug coverage. Medigap prescription drug coverage increases drug spending by $170 or 22%, and reduces Medicare Part A spending by $350 or 13% (in 2000 dollars). Medigap prescription drug coverage reduces Medicare Part B spending, but the estimates are not statistically significant. Overall, a $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending. Furthermore, the substitution effect decreases as income rises, and thus provides support for the low-income assistance program of Medicare Part D.
    JEL: I0
    Date: 2007–09
  5. By: Laszlo Goerke (University of Tübingen, CESifo and IZA); Markus Pannenberg (DIW Berlin, University of Applied Sciences Bielefeld and IZA); Heinrich W. Ursprung (University of Konstanz and CESifo)
    Abstract: Evidently, the benefit-structure of the unemployment insurance has a significant influence on profits and trade union utility. We show for a wage bargaining model that a stronger earnings relationship of unemployment benefits may reduce wages and increase employment. This raises the question as to how the benefit structure is determined in the political process. To answer this question, we consider a government that chooses the earnings relationship with a view to maximising its political support. Our model predicts a strong earnings relationship under right-wing governments and a weak one when the unions' influence is pronounced. Deepening international economic integration has ambiguous effects. Using panel data for 19 OECD countries from 1961 to 2003 we find support for the hypothesized domestic influences and show that the earnings relationship varies negatively with openness.
    Keywords: earnings relationship, panel data, political support maximization, wage bargaining, unemployment benefits
    JEL: D72 J51 J65
    Date: 2007–08

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