nep-ias New Economics Papers
on Insurance Economics
Issue of 2014‒03‒08
four papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. Evidence of Adverse Selection in the Group Insurance Market By Eling, Martin; Jia, Ruo; Yao, Yi
  2. Do Migrants Send Remittances as a Way of Self-Insurance? Evidence from a Representative Immigrant Survey By Batista, Catia; Umblijs, Janis
  3. Use of Supplemental Nutritional Assistance Program Benefits by Unemployment Insurance Applicants in Michigan during the Great Recession By Christopher J. O'Leary; Ken Kline
  4. Social Security and the Rise in Health Spending By Kai Zhao

  1. By: Eling, Martin; Jia, Ruo; Yao, Yi
    Abstract: This paper demonstrates the existence of adverse selection in the group insurance market with no individual choice. We provide evidence against the “conventional wisdom” that group insurance mitigates adverse selection because of the mixture of high risks and low risks. We show, however, that asymmetric learning effects mitigate the group adverse selection after a few policy periods.
    Keywords: Information Asymmetry, Asymmetric Learning, Insurance Decision, Group Health Insurance, Critical Illness Insurance
  2. By: Batista, Catia (Universidade Nova de Lisboa); Umblijs, Janis (Ragnar Frisch Centre for Economic Research)
    Abstract: Do migrants send remittances as a way of obtaining insurance? While this motive is theoretically suggested in the literature, the question of identifying this relationship empirically has only begun to be explored. Using a unique representative survey of 1500 immigrants in the Greater Dublin Area, Ireland, we find a positive and significant relationship between risk aversion and remittance behavior. Risk-averse individuals are more likely to send remittances home and are, on average, likely to remit a higher amount, after controlling for a broad range of individual and group characteristics. Consistent with a "purchase of self-insurance" motive to remit, we also provide evidence of more remittances sent by risk averse immigrants facing higher wage risks and remitting to individuals with more financial resources.
    Keywords: migration, risk aversion, remittances, insurance
    JEL: D81 F22 F24 J01 J08 J15 J61
    Date: 2014–02
  3. By: Christopher J. O'Leary (W.E. Upjohn Institute for Employment Research); Ken Kline (W.E. Upjohn Institute for Employment Research)
    Abstract: During the Great Recession, both the Supplementary Nutrition Assistance Program (SNAP) and the federal-state unemployment insurance (UI) program experienced dramatic increases in participation. Using Michigan program administrative data on all SNAP (2006-2011) recipients and all UI (2001-2010) applicants, we examine SNAP use before and after UI application. Both past and future receipts of SNAP are highly negatively correlated with meeting UI income and job separation eligibility requirements. Unemployment insurance applicants with insufficient wage credits or job separations because of quitting or employer discharge are much more likely to have received SNAP in the past. Furthermore, such UI applicants are also more likely to receive SNAP soon after applying for UI benefits. The data also indicate that as of the start of the Great Recession, UI applicants who received SNAP subsequent to UI filing began receiving those benefits sooner compared with UI applicants prior to the downturn. The models also suggest that SNAP receipt after UI application was higher among ineligible UI applicants, applicants who quit or were fired from prior jobs, those with prior recent SNAP receipt, prime age workers, females, those with education of less than a high school diploma, those having three to five years’ prior job tenure, and those with a separating job in retail trade, health care, or hospitality.
    Keywords: Unemployment insurance, food stamps, supplemental nutrition assistance program, job loss, self sufficiency, economic security, safety net
    JEL: J65 I38
    Date: 2014–02
  4. By: Kai Zhao (University of Connecticut)
    Abstract: In a quantitative model of Social Security with endogenous health, I argue that Social Security increases the aggregate health spending of the economy because it redistributes resources to the elderly whose marginal propensity to spend on health is high. I show by using computational experiments that the expansion of US Social Security can account for over a third of the dramatic rise in US health spending from 1950 to 2000. In addition, Social Security has a spill-over effect on Medicare. As Social Security increases health spending, it also increases the payments from Medicare, thus raising its financial burden.
    Keywords: Social Security, Health Spending, Saving, Longevity
    JEL: E20 E60 H30 I00
    Date: 2014–01

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