nep-ias New Economics Papers
on Insurance Economics
Issue of 2008‒10‒21
three papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Optimal Taxation and Social Insurance with Endogenous Private Insurance By Raj Chetty; Emmanuel Saez
  2. Debt Sustainability Under Catastrophic Risk: The Case for Government Budget Insurance By Eduardo Borensztein; Eduardo Cavallo; Patricio Valenzuela
  3. Flexible Rate Filing Insurance Rate Regulation as Alternative to Incentive Incompatibility in Prior-Approval By Strauss, Jason

  1. By: Raj Chetty; Emmanuel Saez
    Abstract: This paper characterizes the welfare gains from redistributive taxation and social insurance in an environment where the private sector provides partial insurance. We analyze stylized models in which adverse selection, pre-existing information, or imperfect optimization in private insurance markets create a role for government intervention. We derive simple formulas that map reduced-form empirical estimates into quantitative predictions for optimal tax and social insurance policy. Applications to unemployment and health insurance show that taking private market insurance into account matters significantly for optimal benefit levels given existing empirical estimates of the key parameters.
    JEL: D6 H0
    Date: 2008–10
  2. By: Eduardo Borensztein; Eduardo Cavallo (Research Department, Inter-American Development Bank); Patricio Valenzuela
    Abstract: Natural disasters are an important source of vulnerability in the Caribbean region. Despite being one of the more disaster-prone areas of the world, it has the lowest levels of insurance coverage. This paper examines the vulnerability of Belize’s public finance to the occurrence of hurricanes and the potential impact of insurance instruments in reducing that vulnerability. The paper finds that catastrophic risk insurance significantly improves Belize’s debt sustainability. In addition, the methodology employed makes it possible to estimate the appropriate level of insurance, which for the case of Belize is a maximum coverage of US$120 million per year. International organizations can play a role in assisting countries to overcome distortions in insurance markets, as well as in helping to relax internal political resistance to the purchase of insurance policies.
    Keywords: Public Finance, Insurance, Natural Disasters
    JEL: H30 G15 G22 Q54
    Date: 2008–08
  3. By: Strauss, Jason
    Abstract: Competition can be an effective regulator of rates in property-casualty insurance markets. While many states have moved to file-and-use or use-and-file provisions, some have adopted flexible rate-filing regulations (flex-rating) as a means of combining competitive forces with prior-approval regulation. This short note proposes a change to flex-rating so that it can be used to gradually transition a state from prior-approval to file-and-use or use-and-file.
    Keywords: Insurance; Regulation; Flexible Rate Filing Regulation
    JEL: L5 G22 G28
    Date: 2008–10–17

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