nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒06‒07
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Medical Expenditure Risk and Household Portfolio Choice By Dana P. Goldman; Nicole Maestas
  2. Monitoring and norms in sickness insurance: empirical evidence from a natural experiment By Hesselius, Patrik; Johansson, Per; Vikström, Johan
  3. The Effect of Disability Insurance on Health Investment: Evidence from the VA Disability Compensation Program By Perry Singleton
  4. On the Extent of Re-Entitlement Effects in Unemployment Compensation By Javier Ortega; Laurence Rioux

  1. By: Dana P. Goldman; Nicole Maestas
    Abstract: As health care costs continue to rise, medical expenses have become an increasingly important contributor to financial risk. Economic theory suggests that when background risk rises, individuals will reduce their exposure to other risks. This paper presents a test of this theory by examining the effect of medical expenditure risk on the willingness of elderly Medicare beneficiaries to hold risky assets. The authors measure exposure to medical expenditure risk by whether an individual is covered by supplemental insurance through Medigap, an employer, or a Medicare HMO. They account for the endogeneity of insurance choice by using county variation in Medigap prices and non-Medicare HMO market penetration. They find that having Medigap or an employer policy increases risky asset holding by 6 percentage points relative to those enrolled in only Medicare Parts A and B. HMO participation increases risky asset holding by 12 percentage points. Their results point to an important link between the availability and pricing of health insurance and the financial behavior of the elderly.
    Keywords: cost of medical care, managed care plans, health insurance
    JEL: I0
    Date: 2007–02
  2. By: Hesselius, Patrik (Institute for Labour Market Policy Evaluation); Johansson, Per (IFAU - Institute for Labour Market Policy Evaluation); Vikström, Johan (IFAU- Institute for Labour Market Policy Evaluation)
    Abstract: We test if social work norms are important for work absence due to self-perceived sickness. To this end, we use a randomized social experiment designed to estimate the effect of monitoring on work absence. The treated were exposed to less monitoring of their eligibility to use sickness insurance, which increased their non-monitored work absence. Based on a difference in differences analysis, we find that the not directly treated also increased their absence as a result of the experiment. By using an instrumental variables estimator, we find significant endogenous social interaction effects. A 10 per cent exogenous shock in work absence would lead to an immediate 5.7 per cent decrease in the hazard out of sickness absence: the long-run effect is calculated as a 13.3 per cent decrease in the corresponding hazard.
    Keywords: Work norms; social insurance; social interactions; sickness absence
    JEL: C14 C23 C41 J22 Z13
    Date: 2008–05–16
  3. By: Perry Singleton (Center for Policy Research, Maxwell School, Syracuse University, Syracuse, NY 13244-1020)
    Abstract: I examine whether individuals respond to monetary incentives to detect latent medical conditions. The effect is identified by an amendment to Title 38 that deemed diabetes associated with Agent Orange exposure a compensable disability under the VA's Disability Compensation program. Since a diagnosis is a requisite for benefit eligibility, and nearly one-third of diabetics remain undiagnosed, the advent of disability insurance may have encouraged the detection of diabetes among the previously undiagnosed population. Evidence from the National Health Interview Survey suggests that the policy increased the prevalence of diabetes b 2.7 percentage ponts among veterans.
    Keywords: Human capital investment, health, diabetes, Vietnam veterans, Agent Orange
    JEL: H0 I12
    Date: 2008–05
  4. By: Javier Ortega; Laurence Rioux
    Abstract: A dynamic labor matching economy is presented, in which the unemployed are either entitled tounemployment insurance (UI) or unemployment assistance (UA), and the employees are eithereligible for UI or UA upon future separations. Eligibility for UI requires a minimum duration ofcontributions and UI benefits are then paid for a limited duration. Workers are risk-averse and wagesare determined in a bilateral Nash bargain. As eligibility for UI does not automatically follow fromemployment, the two types of unemployed workers have different threat points, which deliversequilibrium wage dispersion. Most of the variables and parameters of the model are estimated usingthe French sample of the European Community Household Panel (1994-2000). We show thatextending the UI entitlement improves the situation of all groups of workers and slightly lowersunemployment, while raising UI benefits harms the unemployed on assistance and raisesunemployment. Easier eligibility fo r UI also improves the situation of all groups of workers andfavors relatively more the least well-off than longer entitlement. The re-entitlement effect in Francelowers by 10% the rise in the wage and by 13% the rise in unemployment following a 10% increase inbenefit levels.
    Keywords: re-entitlement effects, unemployment compensation, matching
    JEL: J41 J65
    Date: 2008–01

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