nep-ias New Economics Papers
on Insurance Economics
Issue of 2014‒02‒15
seven papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Market Inefficiency, Insurance Mandate and Welfare: U.S. Health Care Reform 2010 By Juergen Jung; Chung Tran
  2. Short-run Effects of Job Loss on Health Conditions, Health Insurance, and Health Care Utilization By Jessamyn Schaller; Ann Huff Stevens
  3. Human capital dynamics and the U.S. labor market By Nie, Jun; Fang, Lei
  4. Risk Aversion and the Desirability of Attenuated Legal Change By Steven Shavell
  5. A Theory of Top Income Taxation and Social Insurance By Francisco M. Gonzalez; Jean-Francois Wen
  6. Optimal Tax Progressivity: An Analytical Framework By Heathcote, Jonathan; Storesletten, Kjetil; Violante, Giovanni L.
  7. Union Advantage for Black Workers By Janelle Jones; John Schmitt

  1. By: Juergen Jung (Department of Economics, Towson University); Chung Tran (Research School of Economics, The Australian National University)
    Abstract: We quantify the effects of the Affordable Care Act using a stochastic general equilibrium overlapping generations model with endogenous health capital accumulation calibrated to match U.S. data on health spending and insurance take-up rates. The introduction of an insurance mandate and the expansion of Medicaid, that are at the core of the Affordable Care Act, increase the insurance coverage rate of workers from 76 to 90 percent while simultaneously causing a reduction in capital accumulation, labor supply and aggregate output. Individuals in poor health with low income experience welfare gains while high income individuals in good health experience welfare losses. The insurance mandate, enforced by penalties and subsidies, reduces the adverse selection problem in private health insurance markets and counteracts the crowding-out effect of the Medicaid expansion. In addition, an alternative design of the insurance mandate with more aggressive penalties can lead to universal insurance coverage at smaller efficiency and welfare losses.
    Keywords: Affordable Care Act 2010, insurance mandate, Medicaid, endogenous health capital, life-cycle health spending and financing, dynamic stochastic general equilibrium model, Grossman health capital.
    JEL: H51 I18 I38 E21 E62
    Date: 2014–02
  2. By: Jessamyn Schaller; Ann Huff Stevens
    Abstract: Job loss in the United States is associated with long-term reductions in income and long-term increases in mortality rates. This paper examines the short- to medium-term changes in health, health care access, and health care utilization after job loss that lead to these long-term effects. Using a sample with more than 9800 individual job losses and longitudinal data on a wide variety of health-related measures and outcomes, we show that job loss results in worse self-reported health, including mental health, but is not associated with statistically significant increases in a variety of specific chronic conditions. Among the full sample of workers, we see reductions in insurance coverage, but little evidence of reductions in health care utilization after job loss. Among the subset of displaced workers for whom the lost job was their primary source of insurance we do see reductions in doctor’s visits and prescription drug usage. These results suggest that access to health insurance and care may be an important part of the health effects of job loss for some workers. The pattern of results is also consistent with a significant role for stress in generating long-term health consequences after job loss.
    JEL: I1 J63
    Date: 2014–02
  3. By: Nie, Jun (Federal Reserve Bank of Kansas City); Fang, Lei
    Keywords: Unemployment; Unemployment Insurance (UI)Benefits; Matching Model; Human Capital; Labor Market
    JEL: E24 J08
    Date: 2014–01–01
  4. By: Steven Shavell
    Abstract: This article develops two points. First, insurance against the risk of legal change is largely unavailable, primarily because of the correlated nature of the losses that legal change generates. Second, given the absence of insurance against legal change, it is generally desirable for legal change to be attenuated. Specifically, in a model of uncertainty about two different types of legal change—in regulatory standards, and in payments for harm caused—it is demonstrated that the optimal new regulatory standard is less than the conventionally efficient standard, and that the optimal new payment for harm is less than the harm.
    JEL: H8 K10 K20
    Date: 2014–02
  5. By: Francisco M. Gonzalez; Jean-Francois Wen (University of Calgary)
    Abstract: The development of the welfare state in the Western economies between 1930 and 1990 coincided with a puzzling pattern in the taxation of top incomes. Effective tax rates at the top increased sharply but then gradually decreased, even as social transfers continued rising. We propose a new theory of the development of the welfare state to explain these facts. Our main insight is that social insurance and top income taxation are substitutes for averting social confl‡ict. We emphasize the role of the Great Depression as a source of aggregate risk, and argue that the rise of the welfare state can be understood as a process of exploiting efficiency gains in response to gradual technological improvements in the provision of social insurance. Our detailed arguments build on the policy histories of the United States, Great Britain, and Sweden.
    Date: 2014–02–03
  6. By: Heathcote, Jonathan (Federal Reserve Bank of Minneapolis); Storesletten, Kjetil (University of Oslo); Violante, Giovanni L. (New York University)
    Abstract: What shapes the optimal degree of progressivity of the tax and transfer system? On the one hand, a progressive tax system can counteract inequality in initial conditions and substitute for imperfect private insurance against idiosyncratic earnings risk. At the same time, progressivity reduces incentives to work and to invest in skills, and aggravates the externality associated with valued public expenditures. We develop a tractable equilibrium model that features all of these trade-offs. The analytical expressions we derive for social welfare deliver a transparent understanding of how preferences, technology, and market structure parameters influence the optimal degree of progressivity. A calibration for the U.S. economy indicates that endogenous skill investment, flexible labor supply, and the externality linked to valued government purchases play quantitatively similar roles in limiting desired progressivity.
    Keywords: Progressivity; Income distribution; Skill investment; Labor supply; Partial insurance; Valued government expenditures; Welfare
    JEL: D30 E20 H20 H40 J22 J24
    Date: 2014–01–31
  7. By: Janelle Jones; John Schmitt
    Abstract: In this report, we review the most recent data available to examine the impact of unionization on the wages and benefits paid to black workers. These data show that even after controlling for factors such as age and education level, unionization has a significant positive impact on black workers' wages and benefits. The union advantage is particularly strong for black workers with lower levels of formal education.
    Keywords: union membership, labor, employment, jobs, unions, black workers, education, health insurance
    JEL: J J1 J10 J18 J5 J50 J58 J15
    Date: 2014–02

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