nep-ias New Economics Papers
on Insurance Economics
Issue of 2013‒07‒15
fourteen papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Building Risk into N Recommendations for Corn: Understanding Insurance Applications By van Es, Harold
  2. Effects of Supplemental Revenue Programs on Crop Insurance Coverage Levels By Bulut, Harun; Collins, Keith J.
  3. Premium Estimation Inaccuracy and the Distribution of Crop Insurance Subsidies By Ramirez, Octavio; Colson, Greg
  4. The Economics of Shallow-Loss Crop Insurance: Deductibles vs. Coinsurance Policies By Sproul, Tom; Zilberman, David
  5. Return-to-Work Outcomes Among Social Security Disability Insurance Program Beneficiaries. By Yonatan Ben-Shalom; Arif Mamun
  6. Public Health Insurance, Labor Supply, and Employment Lock By Craig Garthwaite; Tal Gross; Matthew J. Notowidigdo
  7. Cross-subsidization in employer-based health insurance and the effects of tax subsidy reform By Pashchenko, Svetlana; Porapakkarm, Ponpoje
  8. Household's willingness to pay for health microinsurance and its impact on actual take-up: results from a field experiment in Senegal By BONAN Jacopo; LEMAY-BOUCHER Philippe; TENIKUE Michel
  9. Supply of Insurance for Specialty Crops and its Effect on Yield and Acreage By Olen, Beau; Wu, Junjie
  10. Unemployment Insurance Take-up Rates in an Equilibrium Search Model By David Fuller; Stephane Auray; Damba Lkhagvasuren
  11. Old, sick, alone, and poor: a welfare analysis of old-age social insurance programs By R. Anton Braun; Karen A. Kopecky; Tatyana Koreshkova
  12. Inferring labor income risk and partial insurance from economic choices By Fatih Guvenen; Anthony Smith
  13. Do Insurers Risk-Select Against Each Other? Evidence from Medicaid and Implications for Health Reform By Ilyana Kuziemko; Katherine Meckel; Maya Rossin-Slater
  14. Two-Period Comparison of Healthcare Demand with Income Growth and Population Aging in Rural China: Implications for Adjustment of the Healthcare Supply and Development By Martine AUDIBERT; Yong HE; Jacky MATHONNAT

  1. By: van Es, Harold
    Keywords: risk, insurance applications, Risk and Uncertainty,
    Date: 2013–03
  2. By: Bulut, Harun; Collins, Keith J.
    Keywords: crop insurance, risk management, risk aversion, risk, Risk and Uncertainty,
    Date: 2013–03–14
  3. By: Ramirez, Octavio; Colson, Greg
    Keywords: risk, premium, subsidies, crop insurance, premium estimation, Risk and Uncertainty,
    Date: 2013–03
  4. By: Sproul, Tom; Zilberman, David
    Keywords: crop insurance, risk, uncertainty, coinsurance, Risk and Uncertainty,
    Date: 2013–03–14
  5. By: Yonatan Ben-Shalom; Arif Mamun
    Keywords: Return to Work Outcomes, Social Security Disability Insurance, SSDI, Beneficiaries
    JEL: I J
    Date: 2013–06–21
  6. By: Craig Garthwaite; Tal Gross; Matthew J. Notowidigdo
    Abstract: We study the effect of public health insurance eligibility on labor supply by exploiting the largest public health insurance disenrollment in the history of the United States. In 2005, approximately 170,000 Tennessee residents abruptly lost public health insurance coverage. Using both across- and within-state variation in exposure to the disenrollment, we estimate large increases in labor supply, primarily along the extensive margin. The increased employment is concentrated among individuals working at least 20 hours per week and receiving private, employer-provided health insurance. We explore the dynamic effects of the disenrollment and find an immediate increase in job search behavior and a steady rise in both employment and health insurance coverage following the disenrollment. Our results suggest a significant degree of “employment lock” – workers employed primarily in order to secure private health insurance coverage. The results also suggest that the Affordable Care Act – which similarly affects adults not traditionally eligible for public health insurance – may cause large reductions in the labor supply of low-income adults.
    JEL: J20
    Date: 2013–07
  7. By: Pashchenko, Svetlana; Porapakkarm, Ponpoje
    Abstract: A major source of insurance coverage for non-elderly adults in the US is employer-based health insurance market. Every participant of this market gets a tax subsidy since premiums are excluded from taxable income. However, people have different incentives to participate in the employer-based pool - since premiums are independent of individual risk, high-risk individuals receive implicit cross-subsidies from low-risk individuals. In this paper we explore several ways to reform the tax subsidy by taking this implicit cross-subsidization into account. We construct a general equilibrium heterogeneous agents model and calibrate it using the Medical Expenditure Panel Survey Dataset. We find that even though the complete elimination of the tax subsidy leads to the unraveling of the employer-based pool, there is still room for substantial savings by targeting the tax subsidy. More specifically, the same level of risk-sharing in the employer-based market can be achieved at one third of the current costs if i) the tax subsidy is targeted only towards low-risk people who have weak incentives to participate in the pool, and ii) employer-based insurance premiums become age-adjusted. To improve welfare outcome of this reform the tax subsidy should also be extended to low-income individuals.
    Keywords: health insurance, tax subsidies, risk sharing, general equilibrium
    JEL: D52 D91 E2 E21 E65 H20 I10
    Date: 2013–05–08
  8. By: BONAN Jacopo; LEMAY-BOUCHER Philippe; TENIKUE Michel
    Abstract: In the region of Thies in Senegal community-based health insurance schemes(CBHI)have been present for years. And yet despite the benefits they offer, there remain low take-up rates. Our paper measures the willingness to pay (WTP) for CBHI premiums in such context. Our results highlight the role of income, wealth and risk preferences as determinants of WTP. We also provide an analysis of the predictive power of WTP on the actual take-up of insurance following our offering of membership to a sample of 360 households. WTP has a positive and significant impact on actual take-up.
    Keywords: Community-based health insurance; Willingness to pay; Africa; Senegal
    JEL: D10
    Date: 2013–07
  9. By: Olen, Beau; Wu, Junjie
    Abstract: We exploit variation in the timing of specialty crop insurance supply to different crops and counties in California to assess its effect on output as decomposed into yield and harvested acreage. Four woody-perennial crops and one field-annual crop are used to represent this effect. We find that the supply of crop insurance has a significant positive effect on output for several perennial crops and the field crop, but it only has a significant positive effect on yield for certain perennial crops. These findings suggest that even for disparate crops the supply of insurance reduces production risks for the insured crops and causes harvested acreage to expand. The positive significant effect of insurance supply on yield for several of the woody-perennial crops suggests that, regardless of the effect on acreage, it accelerates growers’ adoption of improved tree/vine varieties and rootstocks, which are likely to be risk-increasing inputs due to the their relatively high cost of investment.
    Keywords: federal crop insurance program, specialty crops, yield, acreage, input-risk relationship, Crop Production/Industries, Demand and Price Analysis, Production Economics,
    Date: 2013
  10. By: David Fuller (Concordia University and CIREQ); Stephane Auray (CREST-ENSAI); Damba Lkhagvasuren (Concordia University and CIREQ)
    Abstract: In the US unemployment insurance (UI) system, only a fraction of those eligible for benefits actually collect them. We estimate this fraction using CPS data and detailed state-level eligibility criteria. We find that the fraction of eligible unemployed collecting benefits has been persistently below one, and is countercyclical. We show these empirical facts can be explained in an equilibrium search model where firms finance UI benefits via a payroll tax, and are heterogeneous with respect to their specific tax rate, which is experience rated. In equilibrium, low tax firms effectively offer workers an alternative UI scheme featuring a faster job arrival rate and a higher wage offer. Some eligible workers prefer the ``market'' scheme and thus do not collect UI. Quantitatively, the model does well matching key moments in the data. In addition, if all eligible unemployed collect, benefit expenditures increase by 29% and welfare increases by 0.43%. Average search effort decreases, but the unemployment rate and duration decrease as vacancy creation increases.
    Keywords: unemployment insurance, take-up, matching frictions, search
    JEL: E61 J32 J64 J65
    Date: 2013–06–26
  11. By: R. Anton Braun; Karen A. Kopecky; Tatyana Koreshkova
    Abstract: Poor health, large acute and long-term care medical expenses, and spousal death are significant drivers of impoverishment among retirees. We document these facts and build a rich, overlapping generations model that reproduces them. We use the model to assess the incentive and welfare effects of Social Security and means-tested social insurance programs such as Medicaid and food stamp programs, for the aged. We find that U.S. means-tested social insurance programs for retirees provide significant welfare benefits for all newborn. Moreover, when means-tested social insurance benefits are of the scale in the United States, all individuals would prefer to be born into an economy with no Social Security. Finally, we find that the benefits of increasing means-tested social insurance are small or negative, if we hold fixed Social Security contributions and benefits at their current levels
    Date: 2013
  12. By: Fatih Guvenen; Anthony Smith
    Abstract: This paper uses the information contained in the joint dynamics of individuals’ labor earnings and consumption-choice decisions to quantify both the amount of income risk that individuals face and the extent to which they have access to informal insurance against this risk. We accomplish this task by using indirect inference to estimate a structural consumption-savings model, in which individuals both learn about the nature of their income process and partly insure shocks via informal mechanisms. In this framework, we estimate (i) the degree of partial insurance, (ii) the extent of systematic differences in income growth rates, (iii) the precision with which individuals know their own income growth rates when they begin their working lives, (iv) the persistence of typical labor income shocks, (v) the tightness of borrowing constraints, and (vi) the amount of measurement error in the data. In implementing indirect inference, we find that an auxiliary model that approximates the true structural equations of the model (which are not estimable) works very well, with negligible small sample bias. The main substantive findings are that income shocks are not very persistent, systematic differences in income growth rates are large, individuals have substantial amounts of information about their income growth rates, and about one-half of income shocks are effectively smoothed via partial insurance. Putting these findings together, we argue that the amount of uninsurable lifetime income risk that individuals perceive is substantially smaller than what is typically assumed in calibrated macroeconomic models with incomplete markets.
    Keywords: Labor economics ; Income
    Date: 2013
  13. By: Ilyana Kuziemko; Katherine Meckel; Maya Rossin-Slater
    Abstract: Increasingly in U.S. public insurance programs, the state finances and regulates competing, capitated private health plans but does not itself directly insure beneficiaries through a public fee-for-service (FFS) plan. We develop a simple model of risk-selection in such settings. Capitation incentivizes insurers to retain low-cost clients and thus improve their care relative to high-cost clients, who they prefer would switch to a competitor. We test this prediction using county transitions from FFS Medicaid to capitated Medicaid managed care (MMC) for pregnant women and infants. We first document the large health disparities and corresponding cost differences between blacks and Hispanics (who make up the large majority of Medicaid enrollees in our data), with black births costing nearly double that of Hispanics. Consistent with the model, black-Hispanic infant health disparities widen under MMC (e.g., the black-Hispanic mortality gap grows by 42 percent) and black mothers' pre-natal care worsens relative to that of Hispanics. Remarkably, black birth rates fall (and abortions rise) significantly after MMC—consistent with mothers reacting to poor care by reducing fertility or plans discouraging births from high-cost groups. Implications for the ACA exchanges are discussed
    JEL: H4 I14 J13
    Date: 2013–07
  14. By: Martine AUDIBERT; Yong HE; Jacky MATHONNAT (Centre d'Etudes et de Recherches sur le Développement International)
    Abstract: We estimate the evolution of healthcare demand under the influence of income growth and population aging with two samples of patients surveyed in the same regions, but with an interval of 18 years in rural China and with mixed logit to deal with heterogeneity. In accordance with theoretical and inductive inferences, it is found that healthcare price effects decreased and became more heterogeneous. Aging impact overweighed income growth impact, resulting in increasing distance effect and patients' preference to proximity. In the face of this demand change, the adjustment of governmental supply should be to promote small and middle-sized healthcare providers. However during this period to cope with urbanization, the Chinese policy consisted of privileging large hospitals. This has led to a higher share of patients, especially the aging patients, to choose self-care and a higher share of poorer patients to suffer from catastrophic health expenditures. This finding carries broad implications for rural health policy-making on, along with income growth, population aging and urbanization, how to provide better coverage of rural areas by enough qualified and multifunctional small and middle-sized healthcare providers in the developing world.
    Keywords: Two-period healthcare demand comparison, mixed logit model, price and distance effects, heterogeneity, insurance, rural China
    JEL: I1 C5 D1
    Date: 2013

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