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on Insurance Economics |
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Issue of 2010‒04‒24
four papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Bussiness Management |
| By: | Philip Z. Maymin; Zakhar G. Maymin |
| Abstract: | We show that any objective risk measurement algorithm mandated by central banks for regulated financial entities will result in more risk being taken on by those financial entities than would otherwise be the case. Furthermore, the risks taken on by the regulated financial entities are far more systemically concentrated than they would have been otherwise, making the entire financial system more fragile. This result leaves three directions for the future of financial regulation: continue regulating by enforcing risk measurement algorithms at the cost of occasional severe crises, regulate more severely and subjectively by fully nationalizing all financial entities, or abolish all central banking regulations including deposit insurance to let risk be determined by the entities themselves and, ultimately, by their depositors through voluntary market transactions rather than by the taxpayers through enforced government participation. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1004.1670&r=ias |
| By: | Unmesh Patnaik; Narayanan K |
| Abstract: | This paper attempts to understand the various risks faced by households living in disaster prone regions of rural India and specifically examine the effectiveness of coping mechanisms adopted by households living in these areas to hedge against the risks. The study area (districts of eastern Uttar Pradesh, India) is highly susceptible to floods with a major flood occurring every ten years and smaller ones happening every one-two years. The data is drawn from primary household surveys undertaken in the study area for flood affected households. The analysis is carried out using a risk sharing and self insurance framework and econometric modeling is carried out using binary outcomes and multivariate probit estimation through GHK (Geweke- Hajivassiliou- Keane) estimator. |
| Keywords: | multivariate probit estimation, consumption, risk, Vulnerability, livelihoods, developing countries, climate, disasters, rural, Uttar Pradesh, India, floods, households, insurance, econometric modelling, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2470&r=ias |
| By: | Yanos Zylberberg (Paris School of Economics) |
| Abstract: | In rural economies, risk-sharing arrangements through networks of relatives and friends are common. Monitoring issues seem to impede the development of informal insurance mechanisms at higher level. As such, after a large and covariate shock, the prerequisites under which informal arrangements are feasible might refrain the community to redistribute efficiently resources between sub-groups. I rely on a model of imperfect commitment to derive predictions on the sustainability of risk-sharing arrangements in the aftermath of extreme events at a higher level than usually considered by the literature. I then test these predictions on a representative panel data in Vietnam, using tropical typhoons trails and wind structures. The estimation of a structural equation derived by the theory is compatible with a model of imperfect commitment where the aftermath of natural disasters is associated with stronger enforcement mechanisms at commune level. As such, between 30 and 55 cents are covered through informal transfers at hamlet level for a relative income loss of $ 1.The influence of pre-disaster social norms and existing ties to prevent disruption of integrative mechanisms in the community gives support to this interpretation. Finally, communities having already suffered important trauma show greater signs of resilience. |
| Keywords: | Natural disasters, informal insurance, coordination, imperfect commitment. |
| JEL: | D85 O12 O17 Z13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dpc:wpaper:1110&r=ias |
| By: | Christian Keuschnigg; Thomas Davoine |
| Abstract: | This paper develops a general equilibrium model with safe and risky jobs where unemployment is concentrated in a highly productive but volatile sector. Frictional unemployment arises in the process of job creation, firing and retraining for alternative employment. The paper derives an optimal welfare policy which combines the design of the tax schedule with three pillars of the `flexicurity' model. The optimal policy is characterized by (i) a progressive wage tax schedule; (ii) a wage subsidy to re-employed workers; (iii) unemployment insurance benefits; (iv) job protection to contain firing; and (v) active labor market policy to facilitate labor reallocation. |
| Keywords: | Flexicurity, insurance, job protection, active labor market policy |
| JEL: | J64 J65 J68 J32 H30 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2010:2010-11&r=ias |