nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒01‒26
23 papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Effect of Medicare Eligibility on Spousal Insurance Coverage By Marcus Dillender; Karen Mulligan
  2. An insurance model to cover losses due to highly contagious animal disease in the Finnish pig sector By Niemi, Jarkko K.; Heikkilä, Jaakko; Myyrä, Sami
  3. How well does the crop insurance market function in Russia? By Bobojonov, Ihtiyor; Goetz, Linde; Glauben, Thomas
  4. Using Prospect Theory to Explain Anomalous Crop Insurance Coverage Choice By Babcock, Bruce
  5. Health Insurance and the Labor Market with Wage Rigidities: Insights from a Laboratory Experiment By Katerina Sherstyuka; Dolgorsuren Dorjb; Gerard Russo
  6. The Impact of Farmers’ Risk Preferences on the Design of an Individual Yield Crop Insurance By Bougherara, Douadia; Piet, Laurent
  7. Review of Experience of Social Health Insurance in Three Asian Countries: China, Thailand, and Vietnam By Talampas, Rolando G.
  8. Optimial Allocation of Index Insurance Intervals for Commodities By Diersen, Matthew; Gurung, Pratik; Fausti, Scott
  9. Designing public-private crop insurance in the northern limits of agriculture By Liesivaara, Petri; Meuwissen, Miranda
  10. Health Insurance, Fertility, and the Wantedness of Pregnancies: Evidence from Massachusetts By Apostolova-Mihaylova, Maria; Yelowitz, Aaron
  11. The Political Economy of the 2014 Farm Bill By Orden, David; Zulauf, Carl R.
  12. ADB Brief No. 22: Poverty Dimensions of the Social Protection Index: Results for Asia and the Pacific By Asian Development Bank (ADB); ; ;
  13. Benefit Incidence of Public Transfers: Evidence from the People’s Republic of China By Ke, Shen; Lee, Sang-Hyop
  14. Equilibrium with Mutual Organizations in Adverse Selection Economies By Prescott, Edward C.; Blandin, Adam; Boyd, John H.
  15. Evaluation of the Effectiveness of Pilot Projects in Increasing Supplemental Nutrition Assistance Program (SNAP) Participation Among Medicare's Extra Help Population (Executive Summary) By Emily Sama-Miller; Libby Makowsky; Gretchen Rowe; Elizabeth Brown; Elizabeth Clary; Laura Castner; Miki Satake
  16. Youth Unemployment in India: From a European and Transitional Labour Market Point of View By Schmid, Günther
  17. European economic and monetary union sovereign debt markets By Sensoy, Ahmet; Hacihasanoglu, Erk; Rostom, Ahmed
  18. Databases to Track Use of Preventive Services After Implementation of the Affordable Care Act By Anna Hill JudyAnn Bigby
  19. Constrained inefficiency and optimal taxation with uninsurable risks By Gottardi, Piero; Kajii, Atsushi; Nakajima, Tomoyuki
  20. Georgia: Financial Sector Assessment Program-Safety Nets, Bank Resolution, and Crisis Preparedness and Management Arrangements -Technical Note By International Monetary Fund. Monetary and Capital Markets Department
  21. Interim Assessment of the PhilHealth CARES Project By Baja, Emmanuel S.; Castillo-Carandang, Nina T.; Viray, Brent Andrew G.; Tagle, Pamela A.
  22. Lessons for monetary policy from the euro-area crisis By C.A.E Goodhart
  23. Investor borrowing heterogeneity in a Kiyotaki-Moore style macro model By Punzi, Maria Teresa; Rabitsch, Katrin

  1. By: Marcus Dillender (W.E. Upjohn Institute for Employment Research); Karen Mulligan
    Abstract: A majority of married couples in the United States take advantage of the fact that employers often provide health insurance coverage to spouses. When the older spouses become eligible for Medicare, however, many of them can no longer provide their younger spouses with coverage. In this paper, we study how spousal eligibility for Medicare affects the health insurance and health care access of the younger spouse. We find spousal eligibility for Medicare results in the younger spouse having worse insurance coverage and reduced access to health care services.
    Keywords: Health Insurance, Medicare, Individual Market, Marriage, Employer Benefits, ACA
    JEL: I13 J3
    Date: 2015–01
  2. By: Niemi, Jarkko K.; Heikkilä, Jaakko; Myyrä, Sami
    Abstract: This study analyses numerically an animal disease insurance scheme and how it could be operationalized. We focus on animal producer’s incentives to choose an insurance policy and on the feasibility of the insurance system as a whole. We develop a simple simulation model where the producer chooses whether to take an insurance policy at a given price, and the insurance provider simultaneously decides the price of the scheme. We find that producer interest towards such insurance products is limited. Uptake of insurance could be increased through collective actions such as group insurance or through support for the cost of insurance.
    Keywords: animal disease, risk management, insurance, Health Economics and Policy,
    Date: 2014–08
  3. By: Bobojonov, Ihtiyor; Goetz, Linde; Glauben, Thomas
    Abstract: In this paper we aim to investigate the demand for crop insurance in Russia, identifying primary influencing factors. We use a cross sectional yearly data set on participation in crop insurance and agricultural production for about 60 regions (oblasts) of Russia for the years 2008-2011. We follow Goodwin’s (1993) approach to estimate the crop insurance demand model with the proportion of planted acres insured as the dependent variables. Our results suggest that the previous subsidy policy to reimburse 50 percent of the insurance premiums has reduced the demand for crop insurance. This may be explained by the negative price elasticity of insurance demand as well as with the cumbersome reimbursement mechanism. Furthermore, operation costs of insurance companies lie above international averages and absorb nearly all governmental subsidies without transferring it to the producers. Therefore, the insurance program in Russia does not function as a subsidy transfer mechanism for farmers. The improvement of the efficiency of the insurance industry in Russia is required in order to increase the attractiveness of the program.
    Keywords: Crop insurance, Russia, Risk and Uncertainty,
    Date: 2014–08
  4. By: Babcock, Bruce
    Abstract: Farmers’ decisions about how much crop insurance to buy are not generally consistent with either expected profit or utility maximization. They do not pick coverage levels that maximize expected subsidy nor do they demand full insurance coverage. In addition, the absolute size of farmer-­‐paid premium seems to influence the type of insurance product farmers buy. Understanding demand drivers for crop insurance has taken on new importance because of the expanded role Congress has designated for crop insurance as a key part of Federal farm policy. By modeling financial outcomes as gains and losses, prospect theory offers an appropriate framework to better understand farmers’ purchase decisions. Because insured events are best modeled as continuous random variables, cumulative prospect theory is used to find a theoretical foundation that can explain farmers’ anomalous decisions. The role of the reference point that defines outcomes as either a gain or a loss, the degree of loss aversion, and the probability weighting function are explored under typical distributions of price, yield, and revenue for a corn producer. Choice of reference points that are consistent with farmers using crop insurance to manage risk are not consistent with observed purchase decisions. Choosing the reference point to make crop insurance akin to a stand alone investment generates optimal choices that are consistent with observed decisions and with the way that insurance agents sell the product.
    Keywords: Agribusiness, Agricultural Finance,
    Date: 2015
  5. By: Katerina Sherstyuka (University of Hawaii at Manoa); Dolgorsuren Dorjb (University of Hawaii at Manoa); Gerard Russo (University of Hawaii at Manoa)
    Abstract: Most individuals who have health insurance in the U.S. obtain it through their employer. In some states the government mandates employers to provide insurance to certain types of workers. We use experimental laboratory to study how employer mandates affect labor market efficiency and the level and structure of employment in the presence of wage rigidities such as minimum wage laws. We find that a binding minimum wage reduces labor market efficiency and decreases, and may fully eliminate, voluntary provision of health insurance by firms to low wage workers. Mandating health insurance for all workers guarantees insurance coverage for those employed, but reduces firms’ demand for workers and thus leads to unemployment.
    Keywords: Labor market, health insurance, minimum wages
    JEL: C92 I18 J20 J3
    Date: 2014–10
  6. By: Bougherara, Douadia; Piet, Laurent
    Abstract: Kahneman and Tversky’s Cumulative Prospect Theory (CPT) has proved to be better suited for representing risk preferences than von Neumann and Morgenstern’s Expected Utility Theory (EUT). We argue that neglecting this may explain to some extent why farmers do not contract crop insurance as much as they are expected to. We model the decision to contract an individual yield crop insurance for a sample of 186 French farmers. We show that 21% of the farmers who would be expected to contract assuming that their preferences are EUT, would actually not do so if their true preferences are in fact CPT.
    Keywords: Yield, Crop Insurance, Cumulative Prospect Theory, Premium subsidy, France, Risk and Uncertainty,
    Date: 2014–08
  7. By: Talampas, Rolando G.
    Abstract: The study assesses the experience of three Asian countries: China, Thailand, and Vietnam in the pursuit of universal health coverage (UHC) of their social health insurance schemes. It seeks to analyze a set of domains including membership fees, services, benefits, equity, among others, relative to the economic and political conditions of these countries as "push and pull" factors in achieving UHC. This paper mainly utilizes empirical studies, assessment reports, international discussions and proceedings, and individual country plans of integrating, widening, and deepening health insurance coverage with the end goal of identifying comparative areas where the Philippines might be able to benchmark itself in its UHC quest. The study adopts the UHC cube of the World Health Organization as the framework for the review. It finally submits applicable recommendations that the Philippines may consider in advancing its plans toward universal health coverage.
    Keywords: health insurance, health, social health insurance, universal health coverage
    Date: 2014
  8. By: Diersen, Matthew; Gurung, Pratik; Fausti, Scott
    Abstract: The objective of this research is to incorporate the relationship between forage yields and rainfall levels to find optimal weights on insurance intervals using Pasture, Rangeland, and Forage Rainfall Index (PRF-RI) insurance. Unlike earlier models, actuarial fairness of the insurance product is assumed. Historical rainfall index and hay yield data are used to calculate returns and generate an efficient frontier using Markowitz Portfolio Theory. Analysis of several counties in South Dakota demonstrates that the May-June and July-August intervals are important months for managing forage production risk. Sensitivity analysis included changing coverage levels, productivity factors, and the subsidy level. It is demonstrated that a producer enrolling in PRF-RI would earn higher returns per acre with lower risk compared to not using the subsidized insurance. Without the premium subsidy the mean returns from the optimal portfolio are lower, but the risk reduction remains.
    Keywords: Pasture rangeland and forage rainfall index insurance, portfolio analysis, production risk, Agricultural Finance, Risk and Uncertainty, Q14, D81,
    Date: 2015–01–14
  9. By: Liesivaara, Petri; Meuwissen, Miranda
    Abstract: Government financed crop damage compensation (CDC) scheme is covering crop losses in Finland. The scheme is about to be abolished. Crop insurance scheme based on public–private partnership will be in place in 2016. In this study, we analysed how government expenditure will change due to the policy shift. According to a stochastic simulation model, the government’s risk exposure will decrease and the mean expenditures for the government as well as the variability in expenditure between years are expected to be lower, when the policy is shifted. The results obtained support the government’s decision to terminate the CDC scheme.
    Keywords: government expenditures, crop insurance, stochastic simulation, Risk and Uncertainty,
    Date: 2014–08
  10. By: Apostolova-Mihaylova, Maria; Yelowitz, Aaron
    Abstract: Health insurance reform in Massachusetts lowered the financial cost of both pregnancy (by increased coverage of pregnancy-related medical events) and pregnancy prevention (by increasing access to reliable contraception and family planning). We examine fertility responses for women of childbearing age in Massachusetts and, on net, find no effect from increasing health insurance coverage. This finding, however, masks substantial heterogeneity. For married women aged 20 to 34 – who have high latent fertility and for whom pregnancies are typically wanted – fertility increased by approximately 1 percent. For unmarried women in the same age range – for whom pregnancies are typically unwanted – fertility declined by 9 percent. Fertility rates changed very little for other groups, in part because of low latent fertility or minimal gains in insurance coverage. Pregnancy wantedness increased in the aggregate through a combination of increasing wanted births and decreasing unwanted births.
    Keywords: Health Insurance, Fertility, Moral Hazard, Pregnancy Wantedness
    JEL: I1 I13 I18 J1 J13
    Date: 2015–01–11
  11. By: Orden, David; Zulauf, Carl R.
    Abstract: This article assesses the political economy of the 2014 farm bill, which eliminated annual fixed direct payments but offers enhanced downside risk protection against low prices or declining revenue. The farm bill secured substantial bipartisan majorities in a politically contentious Congress. The countercyclical structure of U.S. support is reaffirmed and crop insurance is enhanced as a safety net pillar. Open policy issues include the distribution of benefits among crops, the design of multiple year support around moving-average revenue benchmarks versus fixed references prices, and questions related to crop insurance, including the overall level of premium subsidies. In an international context, we conclude the 2014 farm safety net likely would not have been enacted had multilateral agreement been reached on the 2008 Doha Round negotiating documents; conversely, the 2014 farm bill makes achieving those limits more difficult.
    Keywords: Agricultural policy, 2014 farm bill, farm subsidies, commodity programs, crop insurance, conservation, WTO, Agricultural and Food Policy, Crop Production/Industries, Livestock Production/Industries, Q17, Q18, Q28, K33, N52,
    Date: 2015
  12. By: Asian Development Bank (ADB); (Regional and Sustainable Development Department, ADB); ;
    Abstract: This paper presents the results of ADB's study on Social Protection Index in Asia and the Pacific from the poverty dimension perspective. The Social Protection Index is a compact, simple indicator designed to help governments assess social protection programs. The paper analyzes the impact on the poor and the nonpoor of three major categories of social protection programs: social insurance, social assistance, and the labor market. The analysis of the poverty impact of social protection programs using the SPI can help governments fine-tune their social protection programs to alleviate poverty and promote inclusive growth.
    Keywords: adb, asian development bank, asdb, asia, pacific, poverty asia, social insurance benefits asia, social assistance programs asia, social protection programs asia, social protection index asia, labor market programs asia, poor and nonpoor social protection programs, poverty alleviation asia, poverty indicator asia, extr
    Date: 2014–05
  13. By: Ke, Shen (Demographic Research Institute, Fudan University); Lee, Sang-Hyop (Center for Korean Studies, University of Hawaii at Manoa)
    Abstract: Benefit incidence analyses provide important insights into problems facing any government struggling to deliver essential and equitable social services. Utilizing the framework of the National Transfer Accounts Project, this paper analyzes the benefit incidence of public transfers across generations and socioeconomic groups in the People’s Republic of China in 2009. Public education transfers were equally distributed by residence, gender, and income groups at the primary and secondary levels but favored city dwellers, females, and the wealthy at the tertiary level. Public health-care programs tended to equally target the young and middle-aged from different socioeconomic groups but tilted toward urban dwellers, males, and higher income groups at older ages. Public pension spending strongly favored high-income groups, with rural residents, females, and lower income groups receiving greatly reduced benefits. Our results also indicate that total public spending favored elderly people as spending per person 65 years and older was twice that per child younger than 19. In the next 10 or 20 years, the government should endeavor to improve and strengthen public support systems. In addition to this effort, the currently fragmented health insurance system and pension system should move toward a unified system to reduce inequalities in benefit incidence across socioeconomic groups.
    Keywords: benefit incidence; public transfers; the People’s Republic of China
    JEL: E62 H53 O15
    Date: 2014–11–01
  14. By: Prescott, Edward C. (Federal Reserve Bank of Minneapolis); Blandin, Adam (Arizona State University); Boyd, John H. (University of Minnesota)
    Abstract: An equilibrium concept in the Debreu (1954) theory-of-value tradition is developed for a class of adverse selection economies and applied to the Spence signaling and Rothschild-Stiglitz (1976) adverse selection environments. The equilibrium exists and is optimal. Further, all equilibria have the same individual type utility vector. The economies are large with a finite number of types that maximize expected utility on an underlying commodity space. An implication of the analysis is that the invisible hand works for this class of adverse selection economies.
    Keywords: adverse selection equilibrium; theory of value; insurance; signaling; mutual organization; the core
    JEL: C62 D46 D82 G22 G29
    Date: 2015–01–09
  15. By: Emily Sama-Miller; Libby Makowsky; Gretchen Rowe; Elizabeth Brown; Elizabeth Clary; Laura Castner; Miki Satake
    Keywords: SNAP, Supplemental Nutrition Assistance Program, Extra Help, MIPPA, Low Income Subsidy, LIS, Medicare, MSP, Medicare Savings Program, Pilot Project, demonstration, SNAP Access, dual eligible, elderly, disabilities, nutrition, difference in difference, quasi experimental, food security , hunger
    JEL: I0 I1
    Date: 2014–12–30
  16. By: Schmid, Günther (WZB - Social Science Research Center Berlin)
    Abstract: This essay first sketches some descriptive material, setting the stage and demonstrating the highly differentiated statistical landscape of various measures for youth unemployment in Europe compared to India and in particular to Germany. Second, it provides a simple but powerful model for the main causes of youth unemployment from which general policy strategies can be derived and illustrated by good practice examples from Europe, in particular Germany. Third, because a large part of the problem is structural, requiring long-term solutions, possible immediate measures to mitigate the severe long-term scar effects for the unemployed youth are briefly reviewed. Large differences of unemployment performance among European countries reveal, for instance, the importance of automatic stabilisers like unemployment insurance in order to counteract the tendency of market economies to put most of the burden of adjustment in times of recession on youth. The fourth and main part, however, is devoted to possible lessons for India from Europe, in particular from countries with low youth unemployment like Austria, Denmark, Germany and the Netherlands. The theoretical framework for these lessons is taken from the concept of Transitional Labour Markets (TLM) which emphasises dual learning systems as an institutional device both for fair intergenerational risk sharing as well as for smooth transitions from school to work.
    Keywords: youth unemployment, education, vocational training, labour market policy, transitional labour markets, risk sharing
    JEL: E24 I24 J64
    Date: 2015–01
  17. By: Sensoy, Ahmet; Hacihasanoglu, Erk; Rostom, Ahmed
    Abstract: This paper focuses on developments in the European Economic and Monetary Union sovereign debt markets in the past decade. The ?rst part analyzes the integration and segmentation structure of the bond markets of the Economic and Monetary Union before and after the sovereign debt crisis, by introducing the novel concept of correlation-based stable networks. Accordingly, a fair integration is observed between the bond markets during the pre-crisis period. However, a strict segmentation emerges, separating the members struggling with debt problems and the ones with relatively strong ?scal performances during the sovereign debt turmoil. The segmentation structure is clearly visualized, revealing the potential paths for crisis and recovery transmission in the future. In the second part, the paper comments on the recent decreasing trend in Economic and Monetary Union member bond yields and their increasing degree of co-movement. Accordingly, the paper argues that these changes do not depend on the ?scal performances of the member countries, but depend on the illusion of quality that appeared with the Fed (U.S. Federal Reserve) tapering signals in early 2013.
    Keywords: Debt Markets,Emerging Markets,Currencies and Exchange Rates,Financial Intermediation,Deposit Insurance
    Date: 2015–01–01
  18. By: Anna Hill JudyAnn Bigby
    Keywords: Preventive Services, Affordable Care Act, Databases
    JEL: I
    Date: 2014–11–30
  19. By: Gottardi, Piero (European University Institute); Kajii, Atsushi (Kyoto University); Nakajima, Tomoyuki (Federal Reserve Bank of Atlanta)
    Abstract: When individuals' labor and capital income are subject to uninsurable idiosyncratic risks, should capital and labor be taxed, and if so, how? In a two-period general equilibrium model with production, we derive a decomposition formula of the welfare effects of these taxes into insurance and distribution effects. This method allows us to determine how the sign of the optimal taxes on capital and labor depends on the nature of the shocks, the degree of heterogeneity among consumers' income, and the way in which the tax revenue is used to provide lump sum transfers to consumers. When shocks affect primarily labor income and heterogeneity is small, the optimal tax on capital is positive. However, in other cases, a negative tax on capital improves welfare.
    JEL: D52 H21
    Date: 2014–11–01
  20. By: International Monetary Fund. Monetary and Capital Markets Department
    Abstract: Recent experience in handling troubled banks was limited. The National Bank of Georgia (NBG) is the lead authority responsible for managing problem banks, as it can appoint a temporary administrator, declare a bank as insolvent and bankrupt, and commence a liquidation procedure. In the 1990s, market entry was not subject to significant restrictions, and the number of banks operating in Georgia reached a peak of 229 in 1994. Since then, the authorities have commenced a significant number of liquidation procedures, and the last cases based on insolvency grounds have been closed in 2009. Therefore, the legal framework for bank resolution and liquidation has not been applied to a significant extent in recent times. The framework for emergency liquidity assistance (ELA) has been improved, but enhancement is needed to protect the NBG against financial risk. The NBG is explicitly authorized to provide ELA to commercial banks that are considered to be viable, and a 2012 NBG decree sets out certain procedural rules governing the disbursement of the ELA. However, when financial stability is endangered, rules on collateral, interest rate, and duration of the facility can be relaxed. This special carve-out can expose the NBG to financial risks—the existence of a systemic threat, rather, calls for a role to be played by the government. Moreover, provisions on collateral, interest rate, and duration should be updated to better take into account the specificities of ELA, and accountability mechanisms should be enhanced. The bank resolution and liquidation regime presents important shortcomings. The NBG can take control of a problem bank by appointing a temporary administrator, which can, in theory, arrange for certain resolution transactions. The bank liquidation framework is prescribed in more detail, given the significant experience gained by the NBG in the past. However, the bank resolution framework lacks a number of important features and several amendments are needed to update it in line with emerging international best practices, with a view to enabling the authorities to implement a speedy and cost-effective resolution process.
    Keywords: Financial Sector Assessment Program;Banking sector;Bank resolution;Liquidity;Commercial banks;Deposit insurance;Financial safety nets;Georgia;
    Date: 2015–01–08
  21. By: Baja, Emmanuel S.; Castillo-Carandang, Nina T.; Viray, Brent Andrew G.; Tagle, Pamela A.
    Abstract: The PhilHealth Customer Assistance, Relations and Empowerment Staff (CARES) project was launched in 2012 to help members and their families navigate the complex Filipino health care system. The study assesses the design and quality of implementation of the PhilHealth CARES project in selected hospitals in PhilHealth`s National Capital Region (NCR). The specific objectives were: 1) understand the overall goals and objectives of the project and how these are being understood by the project managers, implementers, and staff in selected areas in NCR; 2) evaluate to what extent project objectives are being met; 3) identify the project strengths, weaknesses, opportunities, and threats as perceived by CARES managers, implementers, and staff; and 4) craft appropriate policy and programmatic responses to improve project implementation. Focus group discussions and desk review (i.e., documents and records review) were the main methods for the study. Observations and mystery client visits to four PhilHealth-accredited hospitals in NCR (private and public, Level 2 and 3) were also done. The study found there were a few critical gaps (weak technical support, discrepancies among offices in policy implementation/interpretation, problematic claiming procedures, etc.) in the execution and operation of the project which needed to be addressed so as to fully maximize the benefits of the project and ensure its sustainability not just as a project but as a program in the future.
    Keywords: service delivery, Philippines, social health insurance, patient navigation
    Date: 2014
  22. By: C.A.E Goodhart (London School of Economics)
    Abstract: The earlier 2007/8 financial crisis generated the main lessons for monetary policy, notably that price stability does not necessarily guarantee financial stability. Nevertheless, the on-going Eurozone crisis has pointed to further lessons, notably that a single currency covering diverse states does need a Banking Union; and to problems of zero risk-weighting for sovereign debts. Without such a Banking Union, economic divergences between the Eurozone states have continued and look likely to persist.
    Keywords: Price stability; financial stability; banking union; zero lower-bound
    JEL: E52 E44 F36 G01
    Date: 2013–07
  23. By: Punzi, Maria Teresa; Rabitsch, Katrin
    Abstract: TWe allow for heterogeneity in investors' ability to borrow from collateral in a Kiyotaki-Moore style macro model. We calibrate the model to match the quintiles of the distri- bution of leverage ratios of US non-financial firms. We show that financial amplification of the model with heterogeneous investors can be orders of magnitude higher, because of more pronounced asset price reactions.
    Keywords: Collateral Constraints,Leverage,Heterogeneity,Financial Amplification
    JEL: E32 E44
    Date: 2014

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