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on Insurance Economics |
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Issue of 2013‒05‒11
six papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Anesi, Vincent; De Donder, Philippe |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ner:toulou:http://neeo.univ-tlse1.fr/3438/&r=ias |
| By: | Pilar Gómez-Fernández-Aguado (Department of Financial Economics and Accounting, Universidad de Jaén); Antonio Partal-Ureña (Department of Financial Economics and Accounting, Universidad de Jaén); Antonio Trujillo-Ponce (Department of Financial Economics and Accounting, Universidad Pablo de Olavide) |
| Abstract: | Using This paper analyzes the effects on the Spanish banking system of the EU proposal for a new Directive on deposit insurance systems based on risk-sensitive premiums. To do this, we examine the risk profile of Spanish banks during the 2007-2011 period according to several indicators reflecting capital adequacy, asset quality, profitability and liquidity. We conclude that most of banks would increase their contributions with the proposed system, evidencing the cyclical character of the new model. Our results also suggest that risk-based schemes could provide an incentive for sound management by reducing the premiums for those banks with better risk profiles. |
| Keywords: | Banking regulation; financial safety net; deposit insurance premiums; deposit insurance system; moral hazard; European banking system |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:pab:fiecac:13.01&r=ias |
| By: | Soojin Kim (University of Pennsylvania); Dirk Krueger (University of Pennsylvania); Harold Cole (University of Pennsylvania) |
| Abstract: | This paper constructs a dynamic model of health insurance to evaluate the short- and long run effects of policies that prevent firms from conditioning wages on health conditions of their workers, and that prevent health insurance companies from charging individuals with adverse health conditions higher insurance premia. Our study is motivated by recent US legislation that has tightened regulations on wage discrimination against workers with poorer health status (Americans with Disability Act of 2009, ADA, and ADA Amendments Act of 2008, ADAAA) and that will prohibit health insurance companies from charging different premiums for workers of different health status starting in 2014 (Patient Protection and Affordable Care Act, PPACA). In the model, a tradeoff arises between the static gains from better insurance against poor health induced by these policies and their adverse dynamic incentive effects on household efforts to lead a healthy life. Using household panel data from the PSID we estimate and calibrate the model and then use it to evaluate the static and dynamic consequences of no-wage discrimination and no-prior conditions laws for cross-sectional consumption dispersion, the evolution of the cross-sectional health distribution of a cohort of households as well as ex-ante lifetime welfare of a typical member of this cohort. We find that although a combination of both policies is effective in providing full consumption insurance in the short run, it lowers social welfare since it induces a more rapid deterioration of the cohort health distribution over time. Interestingly, introducing each law in isolation has limited adverse dynamic incentive effects, but a combination of both laws severely undermines the incentives to lead healthier lives. The resulting negative effects on health outcomes in society more than offset the static gains from better consumption insurance so that social welfare, measured in terms of the expected discounted lifetime utility, declines as a result of introducing both policy measures in conjunction. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:609&r=ias |
| By: | Tomas J. Philipson; George Zanjani |
| Abstract: | We review and extend the economic analysis of risk and uncertainty as it relates to behavior mitigating health shocks. We summarize some central aspects of the vast positive and normative literature on the role of various forms of insurance that attempt to smooth consumption, which can be uneven due to medical spending induced by health shocks. Much of this literature has been concerned with the barriers that prevent full insurance and the role of the government eliminating their adverse consequences. We argue that this large literature is limited in that it is focused largely on consumption smoothing rather than smoothing of health itself. However, a problem with insuring health itself is that human capital cannot be traded; a person diagnosed with an incurable cancer cannot be made whole through reallocation of someone else’s health. This lack of tradability in human capital implies that pooling of health risks, through private or public insurance, is infeasible except in rare instances such as transplantations. We argue that medical innovation can be interpreted as an insurance mechanism for a population’s health. By enabling treatment of a harmful disease, it completes the previously incomplete market for risk-sharing in health by pooling the health care spending risk. In a sense, medical innovation involves a current certain R&D payment for a reduced future price of health, which is directly comparable to traditional health care insurance where a current premium is paid for a future reduced price of health care. We explore the positive and normative implications of this “health insurance” view of medical R&D and stress the ex ante value of new medical innovations, sometimes for patients that may never even use them. Given the potentially large value of smoothing health itself rather than consumption, we argue that more explicit analysis is needed on the relative value of public programs stimulating medical innovation versus health care reforms largely aimed at enabling consumption-smoothing. |
| JEL: | I0 I11 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19005&r=ias |
| By: | Farber, Henry (Princeton University); Valletta, Robert G. (Federal Reserve Bank of San Francisco) |
| Abstract: | In response to the Great Recession and sustained labor market downturn, the availability of unemployment insurance (UI) benefits was extended to historical highs in the United States. We exploit variation in the timing and size of UI benefit extensions across states to estimate the overall impact of these extensions on unemployment duration, comparing the experience with the prior extension of benefits during the much milder downturn in the early 2000s. Using monthly matched individual data from the U.S. Current Population Survey (CPS) for the periods 2000-2005 and 2007-2012, we estimate the effects of UI extensions on unemployment transitions and duration. We rely on individual variation in benefit availability based on the duration of unemployment spells and the length of UI benefits available in the state and month, conditional on state economic conditions and individual characteristics. We find a small but statistically significant reduction in the unemployment exit rate and a small increase in the expected duration of unemployment arising from both sets of UI extensions. The effect on exits and duration is primarily due to a reduction in exits from the labor force rather than a decrease in exits to employment (the job finding rate). The magnitude of the overall effect on exits and duration is similar across the two episodes of benefit extensions. Although the overall effect of UI extensions on exits from unemployment is small, it implies a substantial effect of extended benefits on the steady-state share of unemployment in the cross-section that is long-term. |
| Keywords: | unemployment, unemployment insurance, unemployment duration |
| JEL: | J64 J65 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7347&r=ias |
| By: | Sancho Salcedo-Sanz (Department of Signal Theory and Communications, Universidad de Alcala, Spain.); L. Carro-Calvo (Department of Signal Theory and Communications, Universidad de Alcala, Spain.); Mercè Claramunt (Dept. Matematica Economica, Financera i Actuarial, Universitat de Barcelona, CREB, XREAP, Barcelona, Spain.); Anna Castañer (Dept. Matematica Economica, Financera i Actuarial, Universitat de Barcelona, CREB, XREAP, Barcelona, Spain.); Maite Marmol (Dept. Matematica Economica, Financera i Actuarial, Universitat de Barcelona, CREB, XREAP, Barcelona, Spain.) |
| Abstract: | Black-box optimization problems (BBOP) are dened as those optimization problems in which the objective function does not have an algebraic expression, but it is the output of a system (usually a computer program). This paper is focussed on BBOPs that arise in the eld of insurance, and more specically in reinsurance problems. In this area, the complexity of the models and assumptions considered to dene the reinsurance rules and conditions produces hard black-box optimization problems, that must be solved in order to obtain the optimal output of the reinsurance. The application of traditional optimization approaches is not possible in BBOP, so new computational paradigms must be applied to solve these problems. In this paper we show the performance of two evolutionary-based techniques (Evolutionary Programming and Particle Swarm Optimization). We provide an analysis in three BBOP in reinsurance, where the evolutionary-based approaches exhibit an excellent behaviour, nding the optimal solution within a fraction of the computational cost used by inspection or enumeration methods. |
| Keywords: | Reinsurance, Optimization Problems, Evolutionary-based algorithms |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2013-04&r=ias |