|
on Insurance Economics |
|
Issue of 2013‒01‒19
ten papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Bingley, Paul (SFI - Danish National Centre for Social Research); Cappellari, Lorenzo (Università Cattolica del Sacro Cuore); Westergård-Nielsen, Niels C. (Aarhus University) |
| Abstract: | We investigate the relationship between life cycle wages and individual membership of unemployment insurance schemes in Denmark. We separate permanent from transitory wages and characterise them using membership of unemployment insurance funds. We find that unemployment insurance is associated with lower wage growth heterogeneity over the life cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance, robustness checks suggest that moral hazard is the relevant interpretation. |
| Keywords: | unemployment insurance, wage dynamics, wage inequality, wage instability |
| JEL: | J31 J65 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7128&r=ias |
| By: | Michaël Zemmour (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne) |
| Abstract: | The funding of social protection has strongly evolved in Bismarckian countries : whereas social protection used to rely on social contributions, since the 1990s most of the new expenditures have been funded through taxation, leading to a more balanced mix in the structure of social protection revenue. I propose a formal model in which two social protection systems may coexist : insurance and assistance. Insurance level is set by consensus between firms and unions, whereas assistance expenditures are set by a majority vote in parliament. Social insurance can be manipulated to influence preferences in respect of assistance. It is shown how an exogenous increase in tax competition in a Bismarckian context can lead to the emergence of a mixed model : assistance increases to complement existing insurance, not to replace it. A time series cross-section analysis on 9 countries over 25 years supports the idea that a drop in corporate tax rates can trigger a shift in the tax structure of social protection funding. |
| Keywords: | Assistance; institutional change; insurance; political economy; tax-competition; veto |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00768909&r=ias |
| By: | Karlan, Dean (Yale University); Osei-Akoto, Isaac (University of Ghana); Osei, Robert Darko (University of Ghana); Udry, Christopher (Yale University) |
| Abstract: | The investment decisions of small-scale farmers in developing countries are conditioned by their financial environment. Binding credit market constraints and incomplete insurance can reduce investment in activities with high expected profits. We conducted several experiments in northern Ghana in which farmers were randomly assigned to receive cash grants, grants of or opportunities to purchase rainfall index insurance, or a combination of the two. Demand for index insurance is strong, and insurance leads to significantly larger agricultural investment and riskier production choices in agriculture. The salient constraint to farmer investment is uninsured risk: when provided with insurance against the primary catastrophic risk they face, farmers are able to find resources to increase expenditure on their farms. Demand for insurance in subsequent years is strongly increasing in a farmer's own receipt of insurance payouts, and with the receipt of payouts by others in the farmer's social network. Both investment patterns and the demand for index insurance are consistent with the presence of important basis risk associated with the index insurance, and with imperfect trust that promised payouts will be delivered. |
| JEL: | C93 D24 D92 G22 O12 O13 O16 Q12 Q14 |
| Date: | 2012–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:yaleco:110&r=ias |
| By: | Pascal Billand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France ; Université Jean Monnet, Saint-Etienne, F-42000, France.); Christophe Bravard (Université Grenoble 2 ; UMR 1215 GAEL, F-38000 Grenoble, France ; CNRS, GATE Lyon St Etienne, Saint-Etienne, F-42000, France); Marie Sudipta Sarangi (DIW Berlin and Louisiana State University) |
| Abstract: | We study the formation of mutual insurance networks in a model where every agent who obtains more resources gives a fixed amount of resources to all agents who have obtained less resources. The low resource agent must be directly linked to the high resource agent to receive this transfer. We identify the pairwise stable networks and efficient networks. Then, we extend our model to situations where agents differ in their generosity with regard to the transfer scheme. We show that there exist conditions under which in a pairwise stable network agents who provide the same level of transfers are linked together, while there are no links between agents who provide high transfers and agents who provide low transfers. |
| Keywords: | Mutual insurance networks, Pairwise stable networks, Efficient networks |
| JEL: | C72 D81 D8 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1234&r=ias |
| By: | Røed, Knut (Ragnar Frisch Centre for Economic Research); Skogstrøm, Jens Fredrik (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Based on administrative registers from Norway, we examine how unemployment insurance (UI) and active labor market programs (ALMP) affect the transition rates from unemployment to regular employment and entrepreneurship. We find that the entrepreneurship hazard is highly responsive with respect to UI incentives, and that the probability of starting up a new business increases sharply around the time of UI exhaustion. We also find that while participation in ALMP has a positive impact on the employment hazard, it has no effect on entrepreneurship. We speculate that this reflects the programs' one-sided focus on job search rather than job creation. |
| Keywords: | entrepreneurship, self-employment, unemployment |
| JEL: | L26 J65 M13 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7121&r=ias |
| By: | Naoki Aizawa; Hanming Fang |
| Abstract: | We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated. |
| JEL: | G22 I11 J32 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18698&r=ias |
| By: | Norma B. Coe; Mashfiqur Khan; Matthew S. Rutledge |
| Abstract: | When Social Security’s Full Retirement Age (FRA) increased to age 66 for recent retirees, the peak retirement age increased with it. However, a large share of people continue to claim their Social Security benefits at age 65. This paper explores two potential explanations for the “stickiness” of age 65 as a claiming age: Medicare eligibility and workers’ lack of knowledge about their future Social Security benefits. First, we analyze the impact of Medicare eligibility by comparing two groups – one has an FRA of exactly 65; the other, between age 65 and 2 months and age 66. We find that the group with later FRAs who do not have access to retiree health benefits through their employer are more likely to claim Social Security at age 65. We interpret this finding as evidence that Medicare eligibility persuades more people to retire, because they can begin receiving federal health coverage. Individuals without access to retiree health insurance at work are 7.5 percentage points more likely to retire soon after their 65th birthdays and are 5.8 percentage points less likely to delay retirement until the FRA than those with that insurance. This result fits into extensive research showing that access to health insurance is an important component of the retirement decision. On the question of whether misinformation about Social Security benefits may drive individuals to claim at age 65, we find that some individuals are unable to accurately forecast their retirement benefits. However, our analysis suggests that there is no relationship between this confusion and the age 65 peak for claiming Social Security. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2013-2&r=ias |
| By: | Markussen, Simen (Ragnar Frisch Centre for Economic Research); Røed, Knut (Ragnar Frisch Centre for Economic Research); Røgeberg, Ole J. (Ragnar Frisch Centre for Economic Research) |
| Abstract: | Based on administrative data from Norway, we examine the extent to which family doctors influence their clients' propensity to claim sick pay and disability benefits. The analysis is based on exogenous shifts of family doctors occurring when physicians quit, retire, or for other reasons sell their patient lists to other doctors. Our key finding is that family doctors have significant influence on their clients' benefit claims. We conclude that it is possible for family doctors to contain social insurance costs to some extent, and that there is a significant variation across doctors in the way they do so. |
| Keywords: | sick pay, disability insurance, absence certification, gatekeepers |
| JEL: | H55 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7122&r=ias |
| By: | Alexander Monge (Penn State University); Lance Lochner (University of Western Ontario) |
| Abstract: | Student loan debt in the US stands at roughly $1 trillion, exceeding credit card debt. In recent years, private lending for undergraduates has skyrocketed to account for roughly 20% of all student loan dollars disbursed. At the same time, youth from low-income families are significantly less likely to attend college relative to their higher-income counterparts. This paper examines the nature of credit for education in the presence of uncertainty and problems of limited commitment by borrowers, moral hazard, and adverse selection. Efficient lending contracts, combined with insurance against adverse labor market outcomes, are considered in a variety of economic environments. We examine the importance of different incentive problems in US data to aid in the design of improved credit and insurance for human capital investment. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:299&r=ias |
| By: | Elisa Luciano; Luca Regis; Elena Vigna |
| Abstract: | The paper presents closed-form Delta and Gamma hedges for an- nuities and death assurances, in the presence of both longevity and interest-rate risk. Longevity risk is modelled through an extension of the classical Gompertz law, while interest rate risk is modelled via an Hull-and-White process. We theoretically provide natural hedg- ing strategies, considering also contracts written on dierent genera- tions. We provide a UK-population and bond-market calibrated exam- ple. We compute longevity exposures and explicitly calculate Delta- Gamma hedges. Re-insurance is needed in order to set-up portfolios which are Delta-Gamma neutral to both longevity and interest-rate risk. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpmath:21-2011&r=ias |