nep-ias New Economics Papers
on Insurance Economics
Issue of 2010‒03‒13
eight papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. Does the Availability of Parental Health Insurance Affect the College Enrollment Decision of Young Americans? By Diane M. Harnak Hall; Juergen Jung; Thomas Rhoads
  2. On the Consumption Insurance Effects of Long-term Care Insurance in Japan: Evidence from Micro-level Household Data By Yasushi Iwamoto; Miki Kohara; Makoto Saito
  3. The design of unemployment transfers: Evidence from a dynamic structural life-cycle model By Peter Haan; Victoria Prowse
  4. Preferences for Health Insurance in Germany and the Netherlands – A Tale of Two Countries By Peter Zweifel; Karolin Leukert; Stephanie Berner
  5. Self-fulfilling liquidity dry-ups By Frédéric Malherbe
  6. Optimal capital allocation principles. By Dhaene, Jan; Tsanakas, Andreas; Valdez, Emiliano; Vanduffel, Steven
  7. Using Matched Survey and Administrative Data to Estimate Eligibility for the Medicare Part D Low Income Subsidy Program By Erik Meijer; Lynn A. Karoly; Pierre-Carl Michaud
  8. Inequalities for the De Pril approximation to the distribution of the number of policies with claims. By Vernic, Raluca; Dhaene, Jan; Sundt, Bjorn

  1. By: Diane M. Harnak Hall (Department of Family Studies and Community Development, Towson University); Juergen Jung (Department of Economics, Towson University); Thomas Rhoads (Department of Economics, Towson University)
    Abstract: The present study examines whether the college enrollment decision of young individuals (Student full-time, Student part-time, Non-student) depends on the availability of health insurance from their parents. Our findings indicate that the availability of parental health insurance has strong significant effects on the probability that a young individual enrolls as a full-time student. A young individual who has access to health insurance via a parent is up to 17.5 percent more likely to enroll as a full-time student than a student without parental health insurance.
    Keywords: Occupational choice, health insurance, educational choice, survey of income and program participation (SIPP).
    JEL: C35 I23 I10
    Date: 2010–02
  2. By: Yasushi Iwamoto; Miki Kohara; Makoto Saito
    Abstract: Using micro-level household data in the 2001 Comprehensive Survey of the Living Conditions of the People on Health and Welfare compiled by the Japanese Ministry of Health, Labor and Welfare, this paper examines how having a household member in need of long-term nursing care can result in welfare losses measured in terms of consumption. In so doing, this study evaluates the role of the public long-term care insurance scheme implemented in Japan in April 2000. The results indicate that when households include a disabled family member, household consumption net of long-term care costs do not decrease as much as before the introduction of long-term care insurance. Further, when compared with the surveys conducted in 1998, theadverse effects on consumption net of long-term care costs have become much weaker. These findings suggest that the introduction of social insurance in 2000 helped Japanese households to reduce the welfare losses associated with a disabled family member.
    Keywords: social insurance, consumption insurance, long-term care insurance
    JEL: E21 I18
    Date: 2009–12
  3. By: Peter Haan; Victoria Prowse
    Abstract: In this paper we use a dynamic structural life-cycle model to analyze the employment, fiscal and welfare effects induced by unemployment insurance. The model features a detailed specification of the tax and transfer system, including unemployment insurance benefits which depend on an individual’s employment and earnings history. The model also captures the endogenous accumulation of experience which impacts on future wages, job arrivals and job separations. For better identification of the structural parameters we exploit a quasi-natural experiment, namely reductions over time in the entitlement period for unemployment insurance benefits which varied by age and experience. The results show that a policy cut in the generosity of unemployment insurance operationalized as a reduction in the entitlement period generates a larger increase in employment and yields a bigger fiscal saving than a cut operationalized as a reduction in the replacement ratio. Welfare analysis of revenue neutral tax and transfer reforms also favors a reduction in the entitlement period.
    Keywords: Unemployment insurance, Replacement ratio, Entitlement period, Life-cycle labor supply, Tax reform, Method of Simulated Moments
    JEL: C23 C25 J22 J64
    Date: 2010
  4. By: Peter Zweifel (Socioeconomic Institute, University of Zurich); Karolin Leukert (Polynomics, Olten); Stephanie Berner (Polynomics, Olten)
    Abstract: This contribution contains an international comparison of preferences. Using two Discrete Choice Experiments (DCE), it measures willingness to pay for health insurance attributes in Germany and the Netherlands. Since the Dutch DCE was carried out right after the 2006 health reform, which made citizens explicitly choose a health insurance contract, two research questions naturally arise. First, are the preferences with regard to contract attributes (such as Managed-Care-type restrictions of physician choice) similar between the two countries? Second, was the information campaign launched by the Dutch government in the context of the reform effective in the sense of reducing status quo bias? Based on random-effects Probit estimates, these two questions can be answered as follows. First, while much the same attributes have positive and negative willingness to pay values in the two countries, their magnitudes differ, pointing to differences in preference structure. Second, status quo bias in the Netherlands is one-half of the German value, suggesting that Dutch consumers were indeed made to bear the cost of decision making associated with choice of a health insurance contract.
    Keywords: preference measurement, willingness to pay, health insurance, discrete-choice experiments, health reform, Germany, Netherlands
    JEL: C25 D12 I18
    Date: 2010–02
  5. By: Frédéric Malherbe (National Bank of Belgium, Research Department; Université Libre de Bruxelles, ECARES)
    Abstract: Secondary markets for long-term assets might be illiquid due to adverse selection. In a model in which moral hazard is confined to project initiation, I find that: (1) when agents expect a liquidity dry-up on such markets, they optimally choose to self-insure through the hoarding of non-productive but liquid assets; (2) such a response has negative externalities as it reduces ex-post market participation, which worsens adverse selection and dries up market liquidity; (3) liquidity dry-ups are Pareto inefficient equilibria; (4) the Government can rule them out. Additionally, when agents face idiosyncratic, privately known, illiquidity shocks, I show that: (5) it increases market liquidity; (6) illiquid agents are better-off when they can credibly disclose their liquidity position, but transparency has an ambiguous effect on risk-sharing possibilities.
    Keywords: Liquidity, Liquidity Dry-ups, Financial Crises, Hoarding, Adverse Selection, Self-insurance
    JEL: E44 G11
    Date: 2010–03
  6. By: Dhaene, Jan; Tsanakas, Andreas; Valdez, Emiliano; Vanduffel, Steven
    Abstract: This paper develops a unifying framework for allocating the aggregate capital of a financial firm to its business units. The approach relies on an optimisation argument, requiring that the weighted sum of measures for the deviations of the business unit’s losses from their respective allocated capitals be minimised. This enables the association of alternative allocation rules to specific decision criteria and thus provides the risk manager with flexibility to meet specific target objectives. The underlying general framework reproduces many capital allocation methods that have appeared in the literature and allows for several possible extensions. An application to an insurance market with policyholder protection is additionally provided as an illustration.
    Date: 2009–01–23
  7. By: Erik Meijer; Lynn A. Karoly; Pierre-Carl Michaud
    Abstract: The 2003 Medicare Prescription Drug Improvement and Modernization Act added a new prescription drug benefit to the Medicare program known as Part D (prescription drug coverage), as well as the Low-Income Subsidy (LIS) program to provide "extra help" with premiums, deductibles, and copayments for Medicare Part D beneficiaries with low income and limited assets. In this paper, the authors report on the use of matched survey and administrative data to estimate the size of the LIS-eligible population as of 2006. In particular, they employ individual-level data from the Survey of Income and Program Participation (SIPP) and the Health and Retirement Study (HRS) to cover the potentially LIS-eligible noninstitutionalized and institutionalized populations of all ages. The survey data are matched to Social Security Administration (SSA) administrative data to improve on potentially error-ridden survey measures of income components (e.g., earnings and beneficiary payments from Supplemental Security Income and Old Age, Survivors, and Disability Insurance) and program participation (e.g., participation in Medicare or a Medicaid/Medicare Savings program). The administrative data include the Master Beneficiary Record/Payment History Update System, the Master Earnings File, and the Supplemental Security Record. The survey data are the source of information on asset components, as well as the income components (e.g., private pensions) and individual characteristics (e.g., health status) not covered in the administrative data. Their baseline estimate, based on the matched data, is that about 12 million individuals were potentially eligible for the LIS as of 2006. A sensitivity analysis indicates that the use of administrative data has a relatively small effect on the estimates but does suggest that measurement error is important to account for. The estimate of the size of the LIS-eligible population is more sensitive to the relative weight they place on the two survey data sources, rather than the choice of methods we apply to either data source.
    Date: 2010–02
  8. By: Vernic, Raluca; Dhaene, Jan; Sundt, Bjorn
    Abstract: In the present paper, we give su¢ cient conditions for an ordering of De Pril approximations of the distribution of the number of claims in an insurance portfolio of independent policies. Possible extensions are discussed, both for the De Pril approximation and the Kornya approximation. A numerical example is given.
    Date: 2009–02–03

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