nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒09‒29
seventeen papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Do interactions between unemployment insurance and sickness insurance affect transitions to employment? By Hall, Caroline
  2. A Dynamic Analysis of the Demand for Health Insurance and Health Care By Bolhaar, Jonneke; Lindeboom, Maarten; van der Klaauw, Bas
  3. Evidence on the Insurance Effect of Marginal Income Taxes By Charles Grant; Christos Koulovatianos; Alexander Michaelides; Mario Padula
  4. Dynamic Analysis of the Insurance Linked Securities Index By Mathieu Gatumel; Dominique Guegan
  5. “No Solution to This Dilemma Exists”: Discrimination, Insurance, and the Human Genome Project By Hoy, M.; Ruse, M.
  6. Inequity in Publicly Funded Physician Care: What Is The Role Of Private Prescription Drug Insurance? By Sara Allin; Jeremiah Hurley
  7. Regulation of Private Health Insurance Premiums: Can Performance Assessment Play a Greater Role? By Roger Carrington; Tim Coelli; D. S. Prasada Rao
  8. The Quality of Insurance Intermediary Services – Empirical Evidence for Germany By Eckardt, Martina; Räthke-Döppner, Solvig
  9. Employment-Based Health Insurance and the Minimum Wage By Laura Bucila
  10. Feminization of Ageing and Long Term Care Financing in Singapore By Chia Ngee Choon; Shawna Lim Shi en; Angelique Chan
  11. Experience Studies on Determining Life Premium Insurance Ratings: Practical Approaches By Cristea, Mirela; Mitu, Narcis Eduard
  12. Wage Risk and Employment Risk over the Life Cycle By Low, Hamish; Meghir, Costas; Pistaferri, Luigi
  13. An agent-based computational approach to explaining persistent spatial unemployment disparities By McArthur, David; Thorsen, Inge; Ubøe, Jan
  14. Unemployment Persistence: Is There Evidence for Stigma Effects? By Biewen, Martin; Steffes, Susanne
  15. Human Capital, Multiple Income Risk and Social Insurance By Schindler, Dirk
  16. Demographic Uncertainty and Welfare in a Life-cycle Model under Alternative Public Pension Systems By M Saifur Rahman
  17. The Effect of Activity-Based Payment on Dentists’ Activity: Evidence from a Natural Experiment in the UK National Health Service By Martin Chalkley; Colin Tilley; Linda Young; Debbie Bonnetti; Jan Clarkson

  1. By: Hall, Caroline (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: Previous research suggests that there are substantial interactions between the unemployment insurance (UI) and the sickness insurance (SI) in Sweden. Moral hazard arises in the interplay between these two social insurance systems, since by reporting sick an unemployed person can postpone the UI expiration date and sometimes also receive considerably higher benefits. This paper examines whether these interactions affect the transition rate from unemployment to employment. To study this question I utilize a reform which greatly reduced the incentives for unemployed persons to transfer to the SI. While there is evidence that this reform substantially lowered the incidence of sick reports among the unemployed, I find no evidence suggesting that the reduced sick report rate in turn affected the transition rate to employment
    Keywords: Unemployment insurance; sickness insurance; unemployment duration; health; duration analysis
    JEL: C41 H55 I18 J64 J65
    Date: 2008–09–03
  2. By: Bolhaar, Jonneke (Free University of Amsterdam); Lindeboom, Maarten (Free University of Amsterdam); van der Klaauw, Bas (Free University of Amsterdam)
    Abstract: We investigate the presence of moral hazard and advantageous or adverse selection in a market for supplementary health insurance. For this we specify and estimate dynamic models for health insurance decisions and health care utilization. Estimates of the health care utilization models indicate that moral hazard is not important. Furthermore, we find strong evidence for advantageous selection, largely driven by heterogeneity in education, income and health preferences. Finally, we show that ignoring dynamics and unobserved fixed effects changes the results dramatically.
    Keywords: supplementary private health insurance, health care utilization, advantageous selection, moral hazard, panel data
    JEL: I11 D82 G22 C33
    Date: 2008–09
  3. By: Charles Grant (University of Reading); Christos Koulovatianos (Goethe University Frankfurt, University of Vienna); Alexander Michaelides (London School of Economics); Mario Padula (University Ca' Foscari of Venice)
    Abstract: Marginal income taxes may have an insurance effect by decreasing the effective fluctuations of after-tax individual income. By compressing the idiosyncratic component o personal income fluctuations, higher marginal taxes should be negatively correlated with the dispersion of consumption across households, a necessary implication of an insurance effect of taxation. Our study empirically examines this negative correlation, exploiting the ample variation of state taxes across US states. We show that taxes are negatively correlated with the consumption dispersion of the within-state distribution of non-durable consumption and that this correlation is robust.
    Keywords: Undiversifiable Earnings Risk, Consumption Insurance, Tax Distortions
    JEL: E21 H20 H31
    Date: 2008–02–01
  4. By: Mathieu Gatumel (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper aims to provide a dynamic analysis of the insurance linked securities index. We are discussing the behaviour of the index for three years and pointing out the consequences of some major events like Katrina or the last and current financial crisis. Some stylized facts of the index, like the non-Gaussianity, the asymmetry or the clusters of volatility, are highlighted. We are using some GARCH-type models and the generalized hyperbolic distributions in order to capture these elements. The GARCH in Mean model with a Normal Inverse Gaussian distribution seems to be very efficient to fit the log-returns of the insurance linked securities index.
    Keywords: Insurance Linked Securities, Garch-type models, Normal Inverse Gaussian Distribution
    Date: 2008–09
  5. By: Hoy, M.; Ruse, M.
    Date: 2008
  6. By: Sara Allin (LSE Health, London School of Economics and Political Science); Jeremiah Hurley (Department of Economics and Centre for Health Economics and Policy Analysis, McMaster University)
    Abstract: This study examines the impact that private financing of prescription drugs in Canada has on equity in the utilization of publicly financed physician services. The complementary nature of prescription drugs and physician service use alongside the reliance on private finance for drugs may induce an income gradient in the use of physicians. We use established econometric methods based on concentration curves to measure equity in physician utilization and its contributors in the province of Ontario. We find that individuals with prescription drug insurance make more physician visits than do those without insurance, and the effect on utilization is stronger for the likelihood of a visit than the conditional number of visits, and for individuals with no chronic conditions than those with at least one condition. Results of the equity analyses reveal the most important contributors to the pro-rich inequity in physician utilization are income and private insurance, while public insurance, which covers older people and those on social assistance, has a pro-poor effect. These findings highlight that inequity in access to and use of publicly funded services may arise from the interaction with privately financed health services that are complements to the use of public services.
    Keywords: equity, private insurance, prescription drugs, physician utilization
    Date: 2008
  7. By: Roger Carrington; Tim Coelli; D. S. Prasada Rao (CEPA - School of Economics, The University of Queensland)
    Date: 2008
  8. By: Eckardt, Martina; Räthke-Döppner, Solvig
    Abstract: Insurance intermediaries help consumers to economize on information and transaction costs in insurance markets. However, competing insurance intermediaries provide heterogeneous services, which are difficult to assess by incompletely informed consumers. Transaction costs economics, search theory and principal agent theory provide arguments on product quality differences between the two main distribution channels in insurance markets (exclusive agents vs. independent intermediaries). The present paper uses a sample of 927 insurance intermediaries in Germany. By performing OLS estimations we test the impact of the different distribution channels, but also of other factors relating to the information processing activities on intermediaries’ service quality. Depending on the proxies used for service quality, we find mixed evidence for the “product quality” hypothesis according to which independent intermediaries provide better service quality than exclusive agents. We find that service quality depends also to a large extent on the information gathering and processing activities of the individual intermediaries.
    Keywords: Insurance Distribution Channels; Service Quality
    JEL: D23 G22 D83 L15
    Date: 2008–09
  9. By: Laura Bucila (Department of Economics, College of the Holy Cross)
    Abstract: This paper provides new estimates of the effects of increased federal and state minimum wages on the employment-based health insurance coverage of low-wage workers. I use March Current Population Surveys collected from IPUMS, for 1988 to 2005. Previous studies have found no significant evidence that increased minimum wages reduce fringe benefit receipt (Beeson Royalty 2000; Simon and Kaestner 2003). In contrast to these studies, I use a difference-in-difference approach and I define treatment groups as being individuals in the lowest 1 and 2 deciles of the hourly wage distribution. Little evidence was found for the federal minimum wage increase of 1990-91, but estimates of the effect of the 1996-97 increase suggest a small negative impact for younger workers and workers in smaller firms. At the state level, I find more suggestive results of a negative impact of the minimum wage increases. New Jersey (1992) and Massachusetts (2000-2001) exhibit negative effects of being in the treatment group on the probability of having employment-based health insurance for most of the specifications, while the results in Oregon (1991) and Connecticut (2000-2001) are more sensitive to the specification. The results suggest that being in the treatment group makes individuals 3 to 4 percentage points less likely to be policyholders of employment-based health insurance compared to the control group.
    Keywords: Minimum Wage, Fringe Benefits
    JEL: J32 J33
    Date: 2008–09
  10. By: Chia Ngee Choon (Department of Economics, National University of Singapore); Shawna Lim Shi en (Department of Economics, National University of Singapore); Angelique Chan (Department of Sociology, National University of Singapore)
    Abstract: Feminization of ageing leads to issues relating to long term healthcare financing since females are more susceptible to chronic illnesses. This paper assesses the current provision of long-term care (LTC) in Singapore by first examining the health status of elderly female; and then estimates the present value of LTC expenses. We calibrate the LTC costs for institutional nursing homes, community homes and informal home-based care with domestic helper. We next evaluate the comprehensiveness of a private disability insurance scheme in Singapore (Eldershield) in capturing the expected share of LTC expenditures. We compare the policy comprehensiveness of Eldershield payouts for different utilizations of LTC at different levels of means-tested government subsidies. With subsidies, the LTC cost can be adequately covered by Eldershield; without any subsidies, Eldershield is able to capture 25% to 40% of the LTC costs. We also evaluate the LTC financing implications after an osteoporotic hip fracture surgery.
    Keywords: health financing, long-term care, ageing, disability insurance, policy comprehensiveness
    JEL: H51 I11 J14
    Date: 2008–09–08
  11. By: Cristea, Mirela; Mitu, Narcis Eduard
    Abstract: The focus of this article is to present the modelling tehcniques used on international practice in the evaluation of right life premiums based. The knowledge and models obtained have a common element of mortality risk indicators but these are varied in different parts of the world. The common elements of these studies and models are generally based on a series of indicators which mainly point out their probability of survival and they are named the mortality indicators. These indicators represent the basis for the calculation of the premiums quotes and for the elaboration by the insurers of premium tables. The benefit for the policyholder is to obtain insurance at a fair and competitive price and for the insurer, to maintain the experience of its portfolio in line with mortality assumptions.
    Keywords: Insurance Premiums Quota; Actuarially Selection Criteria; Experience Studies
    JEL: G22 O50 C81
    Date: 2008
  12. By: Low, Hamish (University of Cambridge); Meghir, Costas (University College London); Pistaferri, Luigi (Stanford University)
    Abstract: We specify a structural life-cycle model of consumption, labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects. The sources of risk are shocks to productivity, job destruction, the process of job arrival when employed and unemployed and match level heterogeneity. Our model allows for four main social insurance programmes. In contrast to simpler models that attribute all income fluctuations to shocks, our framework allows us to disentangle the effects of the shocks from the responses to these shocks. Estimates of productivity risk, once we control for employment risk and for individual labour supply choices, are substantially lower than estimates that attribute all wage variation to productivity risk. Increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides (partial) insurance against employment risk and no insurance against persistent shocks.
    Keywords: uncertainty, life-cycle models, unemployment, precautionary savings
    JEL: D91 H31 J64
    Date: 2008–09
  13. By: McArthur, David (Stord/Haugesund University College); Thorsen, Inge (Stord/Haugesund University College); Ubøe, Jan (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: This paper explores possible reasons for persistent spatial unemployment disparities using agent-based computational methods. The method relies on observing the actions of thousands of individuals within an artificial society. The paper models the effect of unemployment insurance, wage disparities, region specific amenities and innate residential preferences on regional labour market interactions, accounting for both migration and commuting. An empirical example of Rogaland county in south-west Norway is given, where unemployment disparities have proved remarkably persistent for decades. The model provides non-trivial insight into the nature of spatial unemployment disparities as well as making a valuable contribution to the policy debate.
    Keywords: Unemployment insurance; wage disparities; region specific amenities; innate residential preferences; regional labour market interactions
    JEL: R10 R12 R15
    Date: 2008–09–22
  14. By: Biewen, Martin; Steffes, Susanne
    Abstract: We present evidence for a highly significant interaction between state dependence in individual unemployment risk and the business cycle. The disadvantage from having been unemployed in the previous period is smaller in times of relatively high unemployment and larger in times of low unemployment. This is consistent with the existence of stigma effects in the sense that unemployed individuals face difficulties finding a new job because employers interpret unemployment as a negative signal and do so especially when it is easier to find jobs, i.e. when unemployment is low.
    Keywords: Unemployment persistence, state dependence, human capital depreciation, stigma effects, scarring
    JEL: C23 J64 J65
    Date: 2008
  15. By: Schindler, Dirk (University of Konstanz)
    Abstract: We set up an OLG-model, where households both choose human capital investment and decide on investing their endogenous savings in a portfolio of riskless and risky assets, exposing them to (aggregate) wage and capital risks due to technological shocks. We derive the optimal public policy mix of taxation and education policy. We show that risks can be efficiently diversified between private and public consumption. This results hinges on that the government can apply a wide set of instruments, including differentiated wage and capital taxation. We also show that for sufficient risk aversion the (Northern) European way of relying on progressive wage taxation and granting education subsidies is an optimal response to wage and capital risks.
    Keywords: Optimal Income Taxation; Multiple Income Risks; Human Capital Investment; Portfolio Choice
    JEL: H21 I28 J24
    Date: 2008–09–22
  16. By: M Saifur Rahman (Indiana University Bloomington)
    Abstract: In this paper, I analyze consumption, aggregate savings, output and welfare implications of five different social security arrangements whenever there is demographic uncertainty. Following Bohn (2002), I analyze the effect of an uncertain population growth in an extended version of a modified Life-cycle model developed by Gertler (1999). Population growth dampens savings and output under all arrangements. Pay-as-you-go-Defined Benefit system appears to fare better than all other alternatives, falling short of the private annuity market with no pension system. But social security in general increases social welfare, with Fully Funded systems faring the best. Thus there appears to be a clear trade-off between growth and social welfare. The social security system also reduces the volatility of the economy.
    Date: 2008–09
  17. By: Martin Chalkley; Colin Tilley; Linda Young; Debbie Bonnetti; Jan Clarkson
    Abstract: The extent to which remuneration systems affect the behaviour of health care professionals is of considerable importance in the administration of publicly funded heath care systems. Using data across two jurisdictions in the United Kingdom, in only one of which remuneration was changed, we compare the extent of measured dental activity at the dentist level in order to ascertain the impact of moving to activity-based remuneration. We find that there are large and statistically significant increases in activity as dentists moved to the activity-based system and that a dentist’s previous form of contract is an important determinant of the magnitude of the effect. We also explore the extent to which dentists’ professional attitudes can explain differences in their activity and find that some aspects of self-reported attitudes are associated with observable differences in activity.
    Date: 2008–08

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