nep-ias New Economics Papers
on Insurance Economics
Issue of 2015‒02‒11
four papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Social Security Benefits, Life Expectancy and Early Retirement By Qi Li; Juan Pantano; Daifeng He; Maria Casanova
  2. Voluntary Public Unemployment Insurance By Parsons, Donald O.; Tranæs, Torben; Lilleør, Helene Bie
  3. Sickness Absence and Local Benefit Cultures By Lindbeck, Assar; Palme, Mårten; Persson, Mats
  4. Public Health Insurance and Entry into Self-employment By Frank M. Fossen; Johannes König

  1. By: Qi Li (University of Chicago); Juan Pantano (Washington University in St. Louis); Daifeng He (College of William and Mary); Maria Casanova (UCLA)
    Abstract: The Social Security Administration computes individual pension benefits using the average survival in the population. However, less educated individuals, and those with lower lifetime incomes, have lower life expectancies than their more educated and richer counterparts. We investigate how heterogeneity in longevity interacts with homogenous social security rules in shaping retirement patterns. In particular, the increase in Social Security benefits for each additional year of work after early retirement age is approximately actuarially fair for individuals with the average longevity. Thus, it is less than actuarially fair for individuals whose life expectancy is lower than average. As a result, individuals with below-average longevity have lower incentives to delay retirement past early retirement age. We estimate a structural dynamic programming model of retirement using microdata from the Health and Retirement Study. We then use the estimated model to simulate retirement behavior under a counterfactual social security system in which individual specific survival odds are used to compute individual benefits. This allow us to investigate the role of actuarial unfairness plays in shaping the observed patterns of early retirement.
    Date: 2014
  2. By: Parsons, Donald O. (George Washington University); Tranæs, Torben (Rockwool Foundation Research Unit); Lilleør, Helene Bie (Rockwool Foundation Research Unit)
    Abstract: Denmark has drawn much attention for its active labor market policies, but is almost unique in offering a voluntary public unemployment insurance program requiring a significant premium payment. A safety net program – a less generous, means-tested social assistance plan – completes the system. The voluntary system emerged as one of many European "Ghent systems," essentially government subsidized trade union plans, but has since lost many key features of such plans. We assess system performance using a 10% sample of the Danish population drawn from administrative data. Coverage rates for the voluntary programs are surprisingly high, approximately 80 percent of the workforce, but the program has predictable selection effects, including adverse selection across risk classes and a substantial charity hazard (low coverage among those with generous treatment under the safety net program). The latter appears to explain the difficulty of shifting to a compulsory system; redistribution effects would be concentrated among the previously uninsured in the lowest decile of the income distribution, a problem in the Danish welfare state.
    Keywords: unemployment insurance, social assistance, early retirement
    JEL: J65 H4
    Date: 2015–01
  3. By: Lindbeck, Assar (Research Institute of Industrial Economics (IFN)); Palme, Mårten (Department of Economics); Persson, Mats (Institute for International Economic Studies)
    Abstract: In many countries, sickness absence financed by generous insurance benefits is an important concern in the policy debate. There are strong variations in absence behavior among local geographical areas. Such variations are difficult to explain in terms of observable socioeconomic factors. In this paper, we investigate whether such variations are related to group effects in the form of social interaction among individuals within neighborhoods. Well-known methodological problems arise when trying to answer this question. A special feature of our efforts to deal with these problems is that we adopt several alternative approaches to identify group effects. Our study is based on a rich set of Swedish panel data, and we find indications of group effects in each of our approaches.
    Keywords: Income insurance; Sic-pay; Social norms; Neighborhood Effects; Sickness Absence
    JEL: H56 I38 J22 Z13
    Date: 2014–12–22
  4. By: Frank M. Fossen; Johannes König
    Abstract: We estimate the impact of a differential treatment of paid employees versus self-employed workers in a public health insurance system on the entry rate into entrepreneurship. In Germany, the public health insurance system is mandatory for most paid employees, but not for the self-employed, who usually buy private health insurance. Private health insurance contributions are relatively low for the young and healthy, and until 2013 also for males, but less attractive at the other ends of these dimensions and if membership in the public health insurance system allows other family members to be covered by contribution-free family insurance. Therefore, the health insurance system can create incentives or disincentives to starting up a business depending on the family’s situation and health. We estimate a discrete time hazard rate model of entrepreneurial entry based on representative household panel data for Germany, which include personal health information, and we account for nonrandom sample selection. We estimate that an increase in the health insurance cost differential between self-employed workers and paid employees by 100 euro per month decreases the annual probability of entry into self-employment by 0.38 percentage points, i.e. about a third of the average annual entry rate. The results show that the phenomenon of entrepreneurship lock, which an emerging literature describes for the system of employer provided health insurance in the USA, can also occur in a public health insurance system. Therefore, entrepreneurial activity should be taken into account when discussing potential health care reforms, not only in the USA and in Germany.
    Keywords: Health insurance, entrepreneurship lock, self-employment
    JEL: L26 I13 J2
    Date: 2015

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