nep-ias New Economics Papers
on Insurance Economics
Issue of 2013‒03‒09
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Health insurance and diversity of treatment: a policy mix perspective By David Bardey; Bruno Jullien; Jean-Marie Lozachmeur
  2. Unemployment Insurance in the Presence of an Informal Sector By David Bardey; Fernando Jaramillo; Ximena Peña
  3. Deductibles and the Demand for Prescription Drugs: Evidence from French Data By Marc Perronnin; Bidénam Kambia-Chopin
  4. Unemployment Compensation and the Allocation of Labor in Developing Countries By Charlot, Olivier; Malherbet, Franck; Ulus, Mustafa

  1. By: David Bardey; Bruno Jullien; Jean-Marie Lozachmeur
    Abstract: We determine the optimal health policy mix when the average utility of patients in- creases with the supply of drugs available in a therapeutic class. Health risk coverage rely on two instruments, copayment and reference pricing, that affect the supported risk composed by health expenses and diversity of treatment. For a fixed supply of drugs, the reference pricing policy aims at minimizing expenses in which case, the equilibrium price of drugs is independent of the copayment rate. However, with endogenous supply of drugs, diversity of treatment may susbtitute for insurance so that the reference pricing may depart from maximal cost-containement to promote entry. We then analyse the determinents of the optimal policy. While an increase in risk aversion or in the side effect loss increases diversity and decreases the copayment rate, an increase in entry cost both decreases diversity and the copayment rate.
    Date: 2013–02–03
  2. By: David Bardey; Fernando Jaramillo; Ximena Peña
    Abstract: We study the effect of UI benefits in a typical developing country where the informal sector is sizeable and persistent. In a partial equilibrium environment we characterize the stationary equilibrium of an economy where policyholders may be employed in the formal sector, short-run unemployed receiving UI benefits and long-run unemployed without UI benefits. We perform comparative static exercises to understand how UI benefits affect unemployed workers’effort to secure a formal job, their labor supply in the informal sector and leisure time. Our model reveals that an increase in UI benefits generates two opposing effects for the short-run unemployed. First, since search efforts cannot be monitored it generates moral hazard behaviours that lower effort. Second, it generates an income effect as it reduces the marginal cost of searching for a formal job and increases effort. The overall effect is ambiguous and depends on the relative strength of these two effects. Additionally, we show that an increase in UI benefits increases the efforts of long-run unemployed workers. Using data from Brazil to calibrate the parameters of the model we provide a simple simulation exercise which suggests that the income effect pointed out is not necessarily of second-order importance in comparison with moral hazard strength: An increase in UI benefits may increase unemployed workers efforts to secure a job in the formal sector, instead of increasing informal-sector work. This result softens the widespread opinion that the presence of dual labor markets is an obstacle to providing UI in developing countries.
    Date: 2013–01–22
  3. By: Marc Perronnin (IRDES Institute for research and information in health economics); Bidénam Kambia-Chopin (MSSS Ministère de la Santé et des services sociaux, Québec(Canada))
    Abstract: On January 1st 2008, a 0.5€ deductible levied on every prescription drug package purchased was introduced in France. This study aims at shedding light on the effect of this policy on prescription drug purchasing behavior among the targeted individuals. Declared behavior from a cross-sectional study based on participants in the French Health, Health Care and Insurance Survey of 2008. The determinants of having changed one’s prescription drugs consumption following the introduction of deductibles were explored based on the socio-behavioral model of Andersen and an economic model of drug demand. The empirical analysis used a logistic regression. All other factors being equal, individuals’ probability of having modified their drug consumption behaviour following the introduction of deductibles decreases with income level and health status (self-assessed health and suffering from a chronic disease). Deductibles on prescription drugs represent a significant financial burden for low-income individuals and those in poor health, with the potential effect of limiting their access to drugs.
    Keywords: User fees, Out-of-pocket payment, Prescription drugs, Financial access, France.
    JEL: D81
    Date: 2013–02
  4. By: Charlot, Olivier (THEMA, University of Cergy-Pontoise); Malherbet, Franck (CREST, Ecole Polytechnique, IZA and fRDB); Ulus, Mustafa (Galatasaray University Economic Research Center)
    Abstract: This paper studies the effects of the introduction of unemployment compensation (UC) in countries characterized by pervasive informality. We provide a simple framework to analyze the impact of UC on the allocation of workers between formal and informal activities, as well as the allocation of workers between sectors featuring different incentives to go informal. We show that a reasonable amount of UC may reduce informality, while larger amounts of UC induce large disincentives to go formal because of the level of taxation involved. We also argue that the financing of UC should be part and parcel of a well- conceived UC system. We show that UC finance based on payroll taxes is likely to entail an excess level of informality resulting from cross-subsidies between heterogenous sectors. The introduction of a simple layoff tax meant to finance the UC system is then shown to reduce informality, hence highlighting how a well-designed financing scheme may be used as a supplementary instrument to curb informality.
    Keywords: Informality; Labor Market Imperfections; Unemployment Insurance
    JEL: E24 E26 J60 L16 O10
    Date: 2013–02–22

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