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on Insurance Economics |
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Issue of 2013‒04‒27
six papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Norma B. Coe; Kalman Rupp |
| Abstract: | There is considerable policy concern about “DI lock” – that tying public health insurance coverage to cash disability benefit receipt contributes to the low exit rates due to work. This concern led Congress to institute continued health insurance eligibility after disability beneficiaries leave the cash-benefit rolls for work-related reasons. However, unlike the long literature on “job lock,” the importance of the DI lock hypothesis – either before or after these extensions – has remained unquantified. This paper tests whether “perceived DI lock” remains among disability beneficiaries, and whether state health insurance policies help alleviate the problem and encourage work among beneficiaries. The analysis includes both DI and SSI beneficiaries and tests if there are differential patterns between the two programs. We exploit state variation in the access and cost of health insurance caused by regulation of the non-group market, the existence of Medicaid buy-in programs, and Medicaid generosity, as well as detailed disability and health insurance program interactions. While we find little evidence overall of persistent DI-lock, heterogeneity is very important in this context. Our estimates suggest that increasing health insurance access does increase the likelihood of positive earnings among a subset of disability beneficiaries. We find evidence of SSI lock among beneficiaries with some Medicaid expenditures and find that both non-group health insurance regulation and generous Medicaid eligibility help alleviate the problem. We find evidence of remaining DI lock among individuals who do not have access to supplemental health insurance outside of Medicare. Medicaid buy-in programs alleviate the remaining DI lock. |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2013-10&r=ias |
| By: | Kyyrä, Tomi (VATT, Helsinki); Tuomala, Juha (VATT, Helsinki) |
| Abstract: | This study explores whether the experience rating of employers' disability insurance premiums affects the inflow of older employees to disability benefits in Finland. To identify the causal effect of experience rating, we exploit a pension reform that extended the coverage of the experience-rated premiums. The results show that a new disability benefit claim can cause substantial cost to the former employer through an increased premium. Nonetheless, we find no evidence of the significant effects of experience rating on the disability inflow. The lack of the behavioral effects may be due to the complexity of experience rating calculations and/or limited employer awareness. |
| Keywords: | experience rating, disability insurance, early retirement |
| JEL: | J14 J26 H32 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7344&r=ias |
| By: | Landmann, Andreas (University of Mannheim); Frölich, Markus (University of Mannheim) |
| Abstract: | Child labor is a common consequence of economic shocks in developing countries. We show how reducing vulnerability can affect child labor and schooling. We exploit the extension of a health and accident insurance scheme by a Pakistani microfinance institution (MFI) that was set up as a randomized controlled trial and accompanied by household panel surveys. Together with increased coverage the MFI offered assistance with claim procedures in treatment branches. Using Difference-in-difference techniques we find lower incidence of child labor and lower child labor earnings caused by the innovation. Separating the two parts of the innovation package, the effects of claim assistance are mostly insignificant, while increased insurance coverage has large effects on child labor outcomes and days missed at school. Consistent with a theoretical model we develop in this paper, the effect is largely due to an ex-ante feeling of protection as opposed to a shock-mitigation effect. |
| Keywords: | child labor, health insurance, Pakistan |
| JEL: | J20 J82 O12 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7337&r=ias |
| By: | Kurosaki, Takashi |
| Abstract: | Aggregate shocks such as droughts and floods cannot be perfectly insured by risk sharing within a village. Given this inability, what type of households are more vulnerable in terms of a decline in consumption when a village is hit by such shocks and what kind of microeconomic mechanism underlies the household heterogeneity in vulnerability? These questions are investigated using two-period panel data collected in rural Pakistan in 2001 and 2004. We compare consumption response to droughts, floods, and health shocks and investigate how the response differs across different types of households. Empirical results show that the impact of droughts was negligible, younger and more landed households were less vulnerable to floods, and households with greater access to formal financial institutions were less vulnerable to idiosyncratic health shocks. The empirical pattern suggests the possibility of risk sharing among households that are heterogeneous in both risk aversion and credit access. |
| Keywords: | natural disaster, consumption smoothing, risk sharing, self-insurance, Pakistan |
| JEL: | O12 D12 D91 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2012-10&r=ias |
| By: | Marina Albanese; Cecilia Navarra; Ermanno Tortia |
| Abstract: | The standard explanation of wage rigidity in principal agent and in efficiency wage models is related to worker risk-aversion. However, these explanations do not consider at least two important classes of empirical evidence: (1) In worker cooperatives workers appear to behave in a less risk averse way than in for profit firms and to accept fluctuating wages; (2) The emerging experimental evidence on the employment contract shows that most workers prefer higher but more uncertain wages to lower fixed wages. Workers do not appear to express a preference for fixed wages in all situations and different ownership forms, in our case worker cooperatives and for-profit firms, behave in different ways when dealing with the trade-off between wage rigidity and employment fluctuations. More specifically, worker cooperatives are characterized, in relative terms, by fixed employment levels and fluctuating wages, while for-profit firms are characterized by fixed wages and fluctuating employment. Our paper reinterprets these stylized facts by focusing on the relationship between wage rigidity and worker risk aversion in light of the presence of employer post contractual opportunism. Contractual incompleteness and private information on the side of the employer can compound in favouring the pursuit of the employerÕs objectives, when they diverge from the employeeÕs ones. The idea of employer moral hazard is able to disentangle the observed behavioural differences in different ownership forms. By resorting to the standard efficiency wage framework, we show that, in the presence of employer moral hazard, employees in capitalistic firms generally prefer fixed wage, accepting this way a positive risk of lay-off. On the contrary, one of the main functions of fluctuating wages in worker cooperatives is to minimize the risk of lay-off. |
| Keywords: | risk aversion, employer contract, moral hazard, asymmetric information, hidden action, risk aversion, income insurance, employment insurance, worker cooperatives |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpem:2013/02&r=ias |
| By: | albanese, marina; navarra, cecilia; Tortia, Ermanno |
| Abstract: | The standard explanation of wage rigidity in principal agent and in efficiency wage models is related to worker risk-aversion. However, these explanations do not consider at least two important classes of empirical evidence: (1) In worker cooperatives workers appear to behave in a less risk averse way than in for profit firms and to accept fluctuating wages; (2) The emerging experimental evidence on the employment contract shows that most workers prefer higher but more uncertain wages to lower fixed wages. Workers do not appear to express a preference for fixed wages in all situations and different ownership forms, in our case worker cooperatives and for-profit firms, behave in different ways when dealing with the trade-off between wage rigidity and employment fluctuations. More specifically, worker cooperatives are characterized, in relative terms, by fixed employment levels and fluctuating wages, while for-profit firms are characterized by fixed wages and fluctuating employment. Our paper reinterprets these stylized facts by focusing on the relationship between wage rigidity and worker risk aversion in light of the presence of employer post contractual opportunism. Contractual incompleteness and private information on the side of the employer can compound in favouring the pursuit of the employer’s objectives, when they diverge from the employee’s ones. The idea of employer moral hazard is able to disentangle the observed behavioural differences in different ownership forms. By resorting to the standard efficiency wage framework, we show that, in the presence of employer moral hazard, employees in capitalistic firms generally prefer fixed wage, accepting this way a positive risk of lay-off. On the contrary, one of the main functions of fluctuating wages in worker cooperatives is to minimize the risk of lay-off. |
| Keywords: | risk aversion; employer contract; moral hazard; asymmetric information; hidden action; risk aversion; income insurance; employment insurance; worker cooperatives |
| JEL: | D82 J31 L23 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46343&r=ias |