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on Insurance Economics |
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Issue of 2008‒08‒06
five papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Mette Ejrnæs (Department of Economics, University of Copenhagen); Gabriel Stefan Hochguertel (VU University Amsterdam) |
| Abstract: | We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a UI-embedded, government-subsidized early retirement (ER) program, giving benefits that are unrelated to business risk. Indeed, we argue that the self-employeds’ incentives to insure themselves stem from the ER plan rather than from the UI cover. We show how to use a policy reform to identify moral hazard in observed transitions to unemployment when insurance is a choice variable. We use administrative (register) panel data covering 10% of the Danish population. We find that the insured are indeed more likely to transit into unemployment than the uninsured, once we properly instrument for the insurance choice. |
| Keywords: | entrepreneurs; self-employment; early retirement; unemployment insurance; moral hazard; Denmark; panel data |
| JEL: | C33 D12 D14 D91 J23 J26 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieca:2008_02&r=ias |
| By: | Mette Ejrnaes (Copenhagen University); Stefan Hochguertel (VU University Amsterdam) |
| Abstract: | We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a UI-embedded, government-subsidized early retirement (ER) program, giving benefits that are unrelated to business risk. Indeed, we argue that the self-employed's incentives to insure themselves stem from the ER plan rather than from the UI cover. We show how to use a policy reform to identify moral hazard in observed transitions to unemployment when insurance is a choice variable. We use administrative (register) panel data covering 10% of the Danish population. We find that the insured are indeed more likely to transit into unemployment than the uninsured, once we properly instrument for the insurance choice. |
| Keywords: | entrepreneurs; self-employment; early retirement; unemployment insurance; moral hazard; Denmark; panel data |
| JEL: | C33 D12 D14 D91 J23 J26 |
| Date: | 2008–07–14 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20080065&r=ias |
| By: | Gregory E. Givens |
| Abstract: | This paper studies the role of unemployment insurance in a sticky-price model that features an efficiency-wage view of the labor market based on unobservable effort. The risk-sharing mechanism central to the model permits, but does not force, agents to be fully insured. Structural parameters are estimated using a maximum-likelihood procedure on US data. Formal hypothesis tests reveal that the data favor a model in which agents only partially insure each other against employment risk. The results also show that limited risk sharing helps the model capture many salient properties of the business cycle that a restricted version with full insurance fails to explain. |
| Keywords: | Unemployment, Partial Insurance, Efficiency Wages, Sticky Prices. |
| JEL: | E31 E32 E52 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:mts:wpaper:200807&r=ias |
| By: | N Powdthavee; |
| Abstract: | This paper presents evidence that an individual's self-assessed health (SAH) does not only suffer from systematic reporting bias and adaptation bias but is also biased owing to confounding social norm effects. Using 13 waves of the British Household Panel Survey, I am able to show that, while there is a negative and statistically significant correlation between SAH and individuals' own health problem index, this negative effect varies significantly with the average number of health problems per (other) family member. Consistent with Akerlof's (1980) social norm theory, the gap in SAH between individuals with and without health problems reduces as the average number of health problems for other household members increases. Under the assumption that SAH is endogenous, this finding suggests that the objective health of other household members could be a good instrument for self-assessed levels of health. |
| Keywords: | Self-assessed health; subjective health; relative; norm; comparison effects; chronic illness; BHPS |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:08/21&r=ias |
| By: | N Powdthavee; |
| Abstract: | The current study uses a large British panel data set to examine the impact of disability, and the speed and extent of adaptation to disability, in seven domain satisfactions. Results show that the onset of a severe disability has the most detrimental impact on health, income, and social life in that order. Adaptation in the domain satisfactions is complete for the moderately disabled. However, there is little evidence of adaptation to severe disability in any of the affected domains. Finally, this paper proposes van Praag et al's (2003) two-layer model as an alternative way to study adaptation. |
| Keywords: | Disability; Adaptation; Domain satisfactions; Life satisfaction; Focusing effects. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:yor:yorken:08/22&r=ias |