nep-ias New Economics Papers
on Insurance Economics
Issue of 2009‒12‒05
five papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Selective contracting and foreclosure in health care markets By Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
  2. Role of Panel Analysis in Identifying Asymmetric Information with Optional Unit Provision in Federal Crop Insurance By Shaik, Saleem
  3. Robust Portfolio Optimization with Derivative Insurance Guarantees By Steve Zymler; Berc Rustem; Daniel Kuhn
  4. Ten propositions about liquidity crises By Claudio Borio
  5. The Effects of Unemployment Insurance on Labor Supply and Search Outcomes: Regression Discontinuity Estimates from Germany By Johannes F. Schmieder; Till von Wachter; Stefan Bender

  1. By: Bijlsma, Michiel; Boone, Jan; Zwart, Gijsbert
    Abstract: We analyze exclusive contracts between health care providers and insurers in a model where some consumers choose to stay uninsured. In case of a monopoly insurer, exclusion of a provider changes the distribution of consumers who choose not to insure. Although the foreclosed care provider remains active in the market for the non-insured, we show that exclusion leads to anti-competitive effects on this non-insured market. As a consequence exclusion can raise industry profits, and then occurs in equilibrium. Under competitive insurance markets, the anticompetitive exclusive equilibrium survives. Uninsured consumers, however, are now not better off without exclusion. Competition among insurers raises prices in equilibria without exclusion, as a result of a horizontal analogue to the double marginalization effect. Instead, under competitive insurance markets exclusion is desirable as long as no provider is excluded by all insurers.
    Keywords: anti-competitive effects; exclusion; foreclosure; health insurance; selective contracting; uninsured
    JEL: G22 I11 L42
    Date: 2009–11
  2. By: Shaik, Saleem
    Abstract: This paper has a two-fold contribution, first we demonstrate the relationship of spatial, temporal and residual yield risk estimated from a two-way panel random effects model to asymmetric information with an optional unit provision in the federal crop insurance program. Second, the yield risk components are incorporated in a discrete choice model to examine the presence of asymmetric information due to potential yield switching with optional unit provisions. Empirical application to 1998 U.S. cotton cro
    Keywords: Adverse Selection, Moral Hazard, Optional Unit Policy, Crop Insurance, U.S. Cotton, Crop Production/Industries, Demand and Price Analysis, D82, G22, Q10,
    Date: 2009–03
  3. By: Steve Zymler; Berc Rustem; Daniel Kuhn
    Abstract: Robust portfolio optimization aims to maximize the worst-case portfolio return given that the asset returns are allowed to vary within a prescribed uncertainty set. If the uncertainty set is not too large, the resulting portfolio performs well under normal market conditions. However, its performance may substantially degrade in the presence of market crashes, that is, if the asset returns materialize far outside of the uncertainty set. We propose a novel robust portfolio optimization model that provides additional strong performance guarantees for all possible realizations of the asset returns. This insurance is provided via optimally chosen derivatives on the assets in the portfolio. The resulting model constitutes a convex second- order cone program, which is amenable to efficient numerical solution. We evaluate the model using simulated and empirical backtests and conclude that it can out- perform standard robust portfolio optimization as well as classical mean-variance optimization.
    Keywords: robust optimization, portfolio optimization, portfolio insurance, second order cone programming
    Date: 2009–08–14
  4. By: Claudio Borio
    Abstract: What are liquidity crises? And what can be done to address them? This short paper brings together some personal reflections on this issue, largely based on previous work. In the process, it questions a number of commonly held beliefs that have become part of the conventional wisdom. The paper is organised around ten propositions that cover the following issues: the distinction between idiosyncratic and systematic elements of liquidity crises; the growing reliance on funding liquidity in a market-based financial system; the role of payment and settlement systems; the need to improve liquidity buffers; the desirability of putting in place (variable) speed limits in the financial system; the proper role of (retail) deposit insurance schemes; the double-edged sword nature of liquidity provision by central banks; the often misunderstood role of "monetary base" injections in addressing liquidity disruptions; the need to develop principles for the provision of central bank liquidity; and the need to reconsider the preventive role of monetary (interest rate) policy.
    Keywords: market and funding liquidity, liquidity crises, deposit insurance, central bank operations, monetary base
    Date: 2009–11
  5. By: Johannes F. Schmieder (Columbia University - Department of Economics); Till von Wachter (Columbia University - Department of Economics); Stefan Bender (Institute for Employment Research (IAB))
    Abstract: This paper evaluates the impact of large changes in the duration of unemployment insurance (UI) in different economic environments on labor supply, job matches, and search behavior. We show that differences in eligibility thresholds by exact age give rise to a valid regression discontinuity design, which we implement using administrative data on the universe of new unemployment spells and career histories over twenty years from Germany. We find that increases in UI have small to modest effects on non-employment rates, a result robust over the business cycle and across demographic groups. Thus, large expansions in UI during recessions do not lead to lasting increases in unemployment duration, nor can they explain differences in unemployment durations across countries. We do not find any effect of increased UI duration on average job quality, but show that the mean potentially confounds differential effects on job search across the distribution of UI duration. However, it appears that for a majority of UI beneficiaries increases in UI duration may lead to small declines in wages.
    Date: 2009

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