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on Insurance Economics |
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Issue of 2013‒07‒28
six papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Pian Shu (Harvard Business School, Technology and Operations Management Unit) |
| Abstract: | Using panel data from the RAND Health and Retirement Study, I show that rejected applicants for Social Security Disability Insurance (SSDI) possess significantly more assets immediately prior to their application and exhibit lower labor force attachment than accepted applicants. These findings are consistent with the theoretical prediction that disability insurance may encourage individuals to save more in the present and plan to apply for disability benefits in the future, regardless of the state of their future health. Because the current empirical literature does not account for this intertemporal channel, it may underestimate the total work disincentive effect of SSDI. |
| Keywords: | Disability insurance, asset accumulation, labor force participation. |
| JEL: | H55 J22 H31 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:14-008&r=ias |
| By: | Diana Cheung (Centre d'Economie de la Sorbonne); Ysaline Padieu (Centre d'Economie de la Sorbonne) |
| Abstract: | This paper estimates the impact of the New Cooperative Medical Scheme (NCMS) on household saving across income quartiles in rural China. We use data from the China Health and Nutrition Survey for the 2006 wave and we run an ordinary least squares regression. We control for the endogeneity of NCMS participation by using an instrumental variable strategy. We find evidence that NCMS has a negative impact on savings of lower-middle-income participants, while it does not affect the poorest households. The negative effect of NCMS on savings of middle-income participants holds when we use propensity score matching estimations as a robustness check. |
| Keywords: | Rural China, New Cooperative Medical Scheme, health insurance, Chinese savings and consumption, propensity score matching. |
| JEL: | C21 D1 I18 O53 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:13056&r=ias |
| By: | Cole, Shawn; Gine, Xavier; Vickery, James |
| Abstract: | Weather is a key source of income risk for many firms and households, particularly in emerging market economies. This paper uses a randomized controlled trial approach to study how an innovative risk management instrument for hedging rainfall risk affects production decisions among a sample of Indian agricultural firms. The analysis finds that the provision of insurance induces farmers to shift production toward higher-return but higher-risk cash crops, particularly among more-educated farmers. The results support the view that financial innovation may help mitigate the real effects of uninsured production risk. In a second experiment, the study elicits willingness to pay for insurance policies that differ in their contract terms, using the Becker-DeGroot-Marshak mechanism. Willingness-to-pay is increasing in the actuarial value of the insurance, but substantially less than one-for-one, suggesting that farmers'valuations are inconsistent with a fully rational benchmark. |
| Keywords: | Climate Change Economics,Labor Policies,Debt Markets,Insurance Law,Non Bank Financial Institutions |
| Date: | 2013–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6546&r=ias |
| By: | Thiemo Fetzer; Maitreesh Ghatak; Jonathan de Quidt |
| Abstract: | This paper contrasts individual liability lending with and without groups to joint liability lending. By doing so, we shed light on an apparent shift away from joint liability lending towards individual liability lending by some microfinance institutions First we show that individual lending with or without groups may constitute a welfare improvement so long as borrowers have sufficient social capital to sustain mutual insurance. Second, we explore how a purely mechanical argument in favor of the use of groups - namely lower transaction costs - may actually be used explicitly by lenders to encourage the creation of social capital. We also carry out some simulations to evaluate quantitatively the welfare impact of alternative forms of lending, and how they relate to social capital. |
| Keywords: | microfinance, group lending, joint liability, mutual insurance |
| JEL: | G11 G21 O12 O16 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:44&r=ias |
| By: | Javier Alonso; Tatiana Alonso; Santiago Fernandez de Lis; Cristina Rohde; David Tuesta |
| Abstract: | The financial system is undergoing an important regulatory overhaul, gradually increased during the last five years. Solvency II and Basel III are two of the most relevant global initiatives that try to reformulate the future landscape for finance. Under this scenario the Insurance and Pensions (I&P) industry, less affected in the crisis, is undergoing important changes that come from different channels. In this regard, this paper focuses on the main global regulatory trends affecting I&P, either directly from its own regulation or indirectly from changes in the banking sector regulation and strategies. After discussing the relevant characteristics of the different pieces of regulation, this study concludes that there is a great disparity among countries in the initial situation of the I&P sectors, both in terms of solvency levels and the diversification/riskiness of investment portfolios, which will cause different effects from a country base perspective: Notwithstanding this, there is a common challenge about how to reconcile more risk-sensitive regulation with the search for a yield in a world with consistently low interest rates. As a consequence of these new pieces of regulation, it is possible to anticipate a scenario of: higher fees; lower appetite for corporate debt; higher cost of derivatives hedging; reduced securitisation activity, an I&P industry more involved in infrastructure funding, and more real estate financing activity from the insurance sector. As regards sovereign debt, the present regulatory statu quo favours a higher demand of these securities by I&P, but the debate on whether to maintain its zero risk weight in Basel III and Solvency II may imply some changes in the future. What is clear in the near future is that regulators of banks, pensions and insurance sectors should analyse the interactions of new regulations; the associated trade-offs and risks and their consistency with a view to avoid creating wrong incentives for the long run. |
| Keywords: | Basel III, Solvency II, Regulation, Insurance, Pensions, Banking |
| JEL: | G18 G28 G38 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:1321&r=ias |
| By: | Matthew A. COLE; Robert J R ELLIOTT; OKUBO Toshihiro; Eric STROBL |
| Abstract: | This paper reviews a decade of implementation of the public long-term care insurance (LTCI) program in Japan, which is now experiencing unprecedented pressure from its rapidly aging population. This overview of the program's features focuses on the incentive mechanisms and diversity, and examines official future projections of LTCI costs and their accompanying assumptions. It also includes the discussion of possible reforms for the LTCI program, with an emphasis on the micro aspects of LTCI, as evidenced by the Japanese Study on Aging and Retirement (JSTAR). |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:13064&r=ias |