nep-ias New Economics Papers
on Insurance Economics
Issue of 2011‒02‒26
six papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Fall Crop Insurance Considerations By Matthew Diersen
  2. Longevity Risk in Life Insurance Products. By Stevens, R.S.P.
  3. Insurance Search and Switching Behavior By Jonneke Bolhaar; Bas van der Klaauw; Maarten Lindeboom
  4. The Impact of National Health Insurance on Birth Outcomes: A Natural Experiment in Taiwan By Shin-Yi Chou; Michael Grossman; Jin-Tan Liu
  5. Contract Structure, Risk Sharing and Investment Choice By Greg Fischer
  6. International Risk Sharing in the Short Run and in the Long Run By Marianne Baxter

  1. By: Matthew Diersen (Deparment of Economics South Dakota State University)
    Date: 2010–08
  2. By: Stevens, R.S.P. (Tilburg University)
    Date: 2011
  3. By: Jonneke Bolhaar (VU University Amsterdam, and Netspar); Bas van der Klaauw (VU University Amsterdam, and CEPR); Maarten Lindeboom (VU University Amsterdam, and Netspar)
    Abstract: This paper looks into the search behavior of consumers in the market for health insurance contracts. We consider the recent health insurance reform in The Netherlands, where a private-public mix of insurance provision was replaced by a system based on managed competition. Although all insurers offer the same basic package (determined by the government), there is substantial premium dispersion. We develop a simple consumer search model containing the main features of the Dutch health insurance system. This model provides us with a number of hypotheses, which we test using data from the Dutch Health Care Consumer Panel. The data confirm the standard predictions on consumer choice (i.e. there is adverse selection and a lower premium increases coverage). We also find that consumers with lower search costs are more likely to receive a group contract offer. This generates a situation of price discrimination where individuals without group contracts and higher s! earch costs pay higher premiums and buy lower insurance coverage.
    Keywords: health insurance; consumer search behavior; Dutch health insurance reform
    JEL: I11 D83
    Date: 2010–07–20
  4. By: Shin-Yi Chou; Michael Grossman; Jin-Tan Liu
    Abstract: We estimate the impacts of the introduction of National Health Insurance (NHI) in Taiwan in March 1995 on the health of infants. Prior to NHI, government workers (the control group) possessed health insurance policies with comprehensive coverage for births and infant medical care services. Private sector industrial workers and farmers (the treatment groups) lacked this coverage. All households received coverage for the services just mentioned as of March 1995. Since stringent requirements for reporting births introduced in 1994 produced artificial upward trends in early infant deaths, we focus on postneonatal mortality (deaths from the 28th through the 364th day of life per thousand survivors of the first 27 days of life). We find that the introduction of NHI led to reductions in this rate for infants born in farm households but not for infants born in private sector households. For the former group, the rate fell by 0.5 deaths per thousand survivors or by 13 percent relative to the mean in the pre-NHI period of 4 deaths per thousand survivors. An especially large decline of 6 deaths per thousand survivors occurred for pre-term infants-- a 36 percent drop relative to the pre-NHI mean of 17 deaths per thousand survivors.
    JEL: I10 I11 I12 I18
    Date: 2011–02
  5. By: Greg Fischer
    Abstract: Few microfinance-funded businesses grow beyond subsistence entrepreneurship.This paper considers one possible explanation: that the structure of existingmicrofinance contracts may discourage risky but high-expected return investments.To explore this possibility, I develop a theory that unifies models of investmentchoice, informal risk sharing, and formal financial contracts. I then test thepredictions of this theory using a series of experiments with clients of a largemicrofinance institution in India. The experiments confirm the theoreticalpredictions that joint liability creates two inefficiencies. First, borrowers free-ride ontheir partners, making risky investments without compensating partners for thisrisk. Second, the addition of peer-monitoring overcompensates, leading to sharpreductions in risk-taking and profitability. Equity-like financing, in which partnersshare both the benefits and risks of more profitable projects, overcomes both of theseinefficiencies and merits further testing in the field.
    Keywords: investment choice, informal insurance, risk sharing, contract design, microfinance,experiment.
    JEL: O12 D81 C91 C92 G21
    Date: 2011–02
  6. By: Marianne Baxter
    Abstract: International risk-sharing has far-reaching implications both for economic policy and for basic research in economics. When countries do not share risk, individuals in those countries experience fluctuations in their consumption levels that are undesirable and possibly unnecessary. This paper extends and refines the study of international risk-sharing in two dimensions. First, this paper investigates risk-sharing at short vs. long horizons. Countries might, for example, pool risks associated with high-frequency shocks (e.g., seasonal fluctuations in crop yields) but might not share risks associated with low frequency shocks (e.g., different long-run national growth rates). Second, this paper studies bilateral risk-sharing, which is different from the approach taken in most previous studies. We find that there is evidence of substantial international risk-sharing at medium and low frequencies. There is evidence of high and increasing risk-sharing within Europe that is not apparent for other regions of the world.
    JEL: E2 E21 E32 F11 F15 F2 F4 F41
    Date: 2011–02

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