nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒04‒13
seven papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The Health Insurance Puzzle in Europe: The Role of Information By Ciro Avitabile
  2. Genetic Information: Comparing Alternative Regulatory Approaches when Prevention Matters By Francesca Barigozzi; Dominique Henriet
  3. Optimal Unemployment Insurance for Older Workers By Hairault, Jean-Olivier; Langot, François; Ménard, Sébastien; Sopraseuth, Thepthida
  4. How a Mandatory Activation Program Reduces Unemployment Durations: The Effects of Distance By Graversen, Brian Krogh; van Ours, Jan C.
  5. Poverty orderings and intra-household inequality By Eugenio Peluso; Alain Trannoy
  6. Retiree Health Benefits and the Decision to Retire By James Marton; Stephen A. Woodbury
  7. Challenges Associated with the Expansion of Deposit Insurance Coverage during Fall 2008 By Schich, Sebastian T.

  1. By: Ciro Avitabile (University College London, University of Naples Federico II and CSEF)
    Abstract: I use microdata from the Survey of Health, Ageing and Retirement in Europe to study whether the cost of acquiring health information is an important determinant of the decision to buy private hospital health insurance for individuals aged 50+, in eight European countries. I first test whether, conditional on health insurance companies' risk assessments, individuals have residual private information on insurance determinants other than their risk type. My results show that there are individual characteristics, not observed by the insurers, that are positively correlated with hospital insurance coverage and negatively correlated with the ex post probability of requiring hospital treatment. However, this opposite association is significantly different from zero only in countries with low quality healthcare systems. I then provide evidence that education and cognitive ability act as substitutes for quality of health promotion in determining the propensity to take out a voluntary private hospital insurance.
    Keywords: Health Insurance, Cognitive Ability, Healthcare Quality
    JEL: D83 G22 I18
    Date: 2009–04–01
  2. By: Francesca Barigozzi; Dominique Henriet
    Abstract: We compare the alternative approaches for regulating genetic information in the health insurance market when prevention measures are available. In the model, firms offer insurance contracts to consumers who are initially uninformed of their risk type but can obtain such information by performing a costless genetic test. A crucial ingredient of our analysis is that information has decision-making value since it allows for optimal choice of a self-insurance action (secondary prevention). We focus on the welfare properties of market equilibria obtained under the different regulatory schemes and, by using an intuitive graphical analysis, we rank them unambiguously. Our results show that Disclosure Duty weakly dominates the other regulatory schemes and that Strict Prohibition represents the worst regulatory approach.
    Keywords: health insurance markets, information gathering, discrimination risk, classification risk, self-insurance
    JEL: D82 D83 G22 L52
    Date: 2008–12
  3. By: Hairault, Jean-Olivier (University of Paris 1); Langot, François (University of Le Mans); Ménard, Sébastien (GAINS, Université du Maine); Sopraseuth, Thepthida (GAINS, Université du Maine)
    Abstract: This paper shows that optimal unemployment insurance contracts are age-dependent. Older workers have only a few years left on the labor market prior to retirement. This short horizon implies a more digressive replacement ratio. However, there is a sufficiently short distance to retirement for which flat unemployment benefits can be the optimal contract as the nearly retired unemployed workers rationally expect never to suffer from the punishment. This is why imposing a tax on the future job is particularly efficient in the context of older workers because the agency can now reward the job search by present employment subsidies. Moreover, we propose adopting a global approach to unemployment insurance by determining an optimal contract that integrates unemployment insurance and retirement pension systems.
    Keywords: unemployment insurance, retirement, recursive contracts, moral hazard
    JEL: C61 J64 J65
    Date: 2009–03
  4. By: Graversen, Brian Krogh (SFI - Danish National Centre for Social Research); van Ours, Jan C. (Tilburg University)
    Abstract: In an experimental setting some Danish unemployed workers were assigned to an activation program while others were not. Unemployed who were assigned to the activation program found a job more quickly. We show that the activation effect increases with the distance between the place of residence of the unemployed worker and the place where the activation took place. We also find that the quality of the post-unemployment jobs was not affected by the activation program. Both findings confirm that activation programs mainly work because they are compulsory and unemployed don't like them.
    Keywords: unemployment insurance, unemployment duration, experiment, activation programs
    JEL: C41 H55 J64 J65
    Date: 2009–03
  5. By: Eugenio Peluso; Alain Trannoy
    Abstract: We investigate under which conditions it is possible to infer the evolution of poverty at the individual level from the knowledge of poverty among households. The analysis is based on a reduced household model (Peluso and Trannoy 2007) and provides results in terms of preservation of poverty orderings...
    Keywords: health insurance markets, information gathering, discrimination risk, classification risk, self-insurance
    JEL: D82 D83 G22 L52
    Date: 2008–10
  6. By: James Marton (Georgia State University); Stephen A. Woodbury (W.E. Upjohn Institute and Michigan State University)
    Abstract: We estimate the effect of employer offers of retiree health benefits (RHBs) on the timing of retirement using a sample of men observed over a period of up to 12 years in the Health and Retirement Study (HRS). Our main concern is that such estimates may be contaminated by unobserved heterogeneity—workers with a taste for early retirement sort into jobs offering RHBs. We attempt to address this concern by using a fixed-effects estimator, which yields substantially smaller estimates of the effect of RHB offers than estimators that do not attempt to control for unobservables. The findings suggest that an RHB offer increased the probability of retirement by 14 percent on average for men born between 1931 and 1941.
    Keywords: Retirement; Health Insurance; Employee Benefits; Unobserved Effects
    JEL: J26 I18 D14
    Date: 2009–03
  7. By: Schich, Sebastian T.
    Abstract: Government provision of a financial safety net for financial institutions has been a key element of the policy response to the current crisis, with governments extending existing guarantees and introducing new ones. These measures have been helpful in avoiding a further accelerated loss of confidence. But they are not costless. Like any guarantee, deposit insurance gives rise to moral hazard, especially if the coverage is unlimited. Clearly, in the midst of a crisis, one should not be overly concerned with moral hazard, as the immediate task is to restore confidence, and guarantees can be helpful in that respect. Nonetheless, to keep market discipline operational, it is important to specify when the extra insurance will end, and this timeline needs to be credible. To be able to establish such a timeline the root causes of the lack of confidence – that is the effects of troubled assets on financial firms’ health – need to be addressed effectively. On a more fundamental level, once a government has ventured down the road of guarantee expansion, there may be a general perception that a government guarantee will always be available during crisis situations. As a consequence, other elements of the financial safety net may need to be strengthened, including the prudential and supervisory framework.
    Keywords: Policy responses to financial crisis, safety net, deposit insurance, moral hazard
    JEL: E61 G22
    Date: 2009

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