nep-ias New Economics Papers
on Insurance Economics
Issue of 2010‒03‒20
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Bussiness Management

  1. The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model By Haan, Peter; Prowse, Victoria L.
  2. Health Insurance Competition in Germany - The Role of Advertising By Bettina Becker; Silke Uebelmesser
  3. Wither The Economics of Agricultural Development? By James Roumasset
  4. An introduction to parametric and non-parametric models for bivariate positive insurance claim severity distributions By David Pitt; Montserrat Guillén

  1. By: Haan, Peter (DIW Berlin); Prowse, Victoria L. (University of Oxford)
    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: 2010–02
  2. By: Bettina Becker (Department of Economics, Loughborough University); Silke Uebelmesser (CES, University of Munich)
    Abstract: In the 1990s, competition among health insurance funds (‘sickness funds’) was introduced in Germany. As one means of competition, free choice of initial health funds and subsequent switching between them was made available to all insured. Since then, the number of funds has decreased substantially, and funds have had to engage in competitive strategies to remain in the market. In this paper, we want to analyse the funds’ advertising activities in the face of the changed competitive environment. This has not been possible to date due to a lack of data. We use two new datasets to get a first insight into the potential effects of competition on funds’ advertising strategies; one of the volume and cost of advertisements and one of their contents. Our results suggest that competition has been associated with an increase in the amount of advertising. As to the adverts themselves, we find that there was a decrease in the share of advertisements of a ‘general’ content in favour of advertisements of a more ‘fund-specific’ content. The data therefore indicate that once the market was open to switching of funds by the insured, funds’ advertising efforts changed to differentiating their own perceived strengths from those of competitor funds. These observations allow us to draw some tentative conclusions about the relevance of (attempts of) risk selection by health funds via advertisements and about the general success of the pro-competitive legislation.
    Keywords: Regulated competition; health insurance market; risk selection; advertising; Germany
    JEL: I11 I18 G22 M37
    Date: 2010–03
  3. By: James Roumasset (Department of Economics, University of Hawaii at Manoa)
    Abstract: In spite of healthy demand for a renaissance in economic policy for agricultural development, the academic supply response is found wanting. The infusion of public economics into the economics of agricultural development, which thrived during the 1970s and 80s, has stagnated due to the lack of foundations in transaction costs, dynamics, and the co-evolution of specialization and governance. Many of the policy ideas found in the World Bank’s, WDR 08, for example, reflect a post-modern tendency to seek and destroy market failures with new mandates and subsidies for farmer cooperatives, microfinance, crop insurance, and land reform. The new development microeconomics favors form over substance and overemphasizes multiple equilibria, trap theories, new market failures, and the new case for social insurance. Empirical research has likewise suffered from the quest for clever instruments and methods instead of informative results that estimate parameters of established theories, distinguish between competing theories, or challenge theory to explain empirical patterns. These latest fads and fancies have distracted economists from the quest for fundamental explanations of development patterns, especially the nature and causes of specialization as an engine of growth. The stage is set for young dynamic scholars to develop new tools of analysis to explain empirical patterns in behavior and organization in developing agriculture and to build the foundations of a public microeconomics of development.
    Keywords: Post-modern, fundamental explanation, small-farm bias, social insurance, new institutional economics
    JEL: O1 O2 O3 O4 Q1
    Date: 2010–03–04
  4. By: David Pitt (Dept. Economics, University of Melbourne); Montserrat Guillén (Dept. Econometrics, University of Barcelona)
    Abstract: We present a real data set of claims amounts where costs related to damage are recorded separately from those related to medical expenses. Only claims with positive costs are considered here. Two approaches to density estimation are presented: a classical parametric and a semi-parametric method, based on transformation kernel density estimation. We explore the data set with standard univariate methods. We also propose ways to select the bandwidth and transformation parameters in the univariate case based on Bayesian methods. We indicate how to compare the results of alternative methods both looking at the shape of the overall density domain and exploring the density estimates in the right tail.
    Date: 2010–03

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