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on Insurance Economics |
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Issue of 2016‒09‒18
eleven papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Marco Di Maggio; Amir Kermani |
| Abstract: | We assess the extent to which unemployment insurance (UI) serves as an automatic stabilizer to mitigate the economy's sensitivity to shocks. Using a local labor market design based on heterogeneity in local benefit generosity, we estimate that a one standard deviation increase in generosity attenuates the effect of adverse shocks on employment growth by 7% and on earnings growth by 6%. Consistent with a local demand channel, we find that consumption is less responsive to local labor demand shocks in counties with more generous benefits. Our analysis finds that the local fiscal multiplier of unemployment insurance expenditure is approximately 1.9. |
| JEL: | E24 E62 H53 J65 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22625&r=ias |
| By: | Mark Shepard |
| Abstract: | Health insurers increasingly compete on their covered networks of medical providers. Using data from Massachusetts’ pioneer insurance exchange, I find substantial adverse selection against plans covering the most prestigious and expensive “star” hospitals. I highlight a theoretically distinct selection channel: these plans attract consumers loyal to the star hospitals and who tend to use their high-price care when sick. Using a structural model, I show that selection creates a strong incentive to exclude star hospitals but that standard policy solutions do not improve net welfare. A key reason is the connection between selection and moral hazard in star hospital use. |
| JEL: | I11 I13 I18 L13 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22600&r=ias |
| By: | Martin Boyer; Franca Glenzer |
| Abstract: | We examine the interaction between the choice of a retirement vehicle and the purchase of long-term care insurance in a world where agents learn about their longevity and long-term care risk over time. In our setting, and absent any long-term care issues, acquiring a retirement product before learning one’s risk type would be preferred by risk averse agents. When we introduce the possibility of needing longterm care, some agents will prefer to wait until they know their health status (i.e., their risk type) before purchasing a retirement product (a situation akin to having a defined contribution pension plan), whereas others will opt to purchase their retirement product before learning their health status (a situation akin to having a defined benefit pension plan). The preference of one retirement vehicle over the other depends, inter alia, on the level of information asymmetry on the market, on an agent’s risk aversion, and on the probability of needing long-term care and its potential cost. When agents purchase their retirement vehicle after (resp. before) knowing their their health status, then agents will choose a contract that provides them with (resp. less than) full long-term care insurance coverage. |
| Keywords: | Asymmetric information, Information acquisition, Adverse Selection, Longevity risk, Screening, Pooling Equilibrium |
| JEL: | D82 G22 H55 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:criacr:1603&r=ias |
| By: | François Gerard; Gustavo Gonzaga |
| Abstract: | It is widely believed that the presence of a large informal sector increases the efficiency cost of social programs – transfer and social insurance programs – in developing countries. We evaluate such claims for policies that have been heavily studied in countries with low informality – increases in unemployment insurance (UI) benefits. We introduce informal work opportunities into a canonical model of optimal UI that specifies the typical tradeoff between workers' need for insurance and the efficiency cost from distorting their incentives to return to a formal job. We then combine the model with evidence drawn from comprehensive administrative data to quantify the efficiency cost of increases in potential UI duration in Brazil. We find evidence of behavioral responses to UI incentives, including informality responses. However, because reemployment rates in the formal sector are low to begin with, most beneficiaries would draw the UI benefits absent behavioral responses, and only a fraction of the cost of (longer) UI benefits is due to perverse incentive effects. As a result, the efficiency cost is relatively low, and in fact lower than comparable estimates for the US. We reinforce this finding by showing that the efficiency cost is also lower in labor markets with higher informality within Brazil. This is because formal reemployment rates are even lower in those labor markets absent behavioral responses. In sum, the results go against the conventional wisdom, and indicate that efficiency concerns may even become more relevant as an economy formalizes. |
| JEL: | H0 J46 J65 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22608&r=ias |
| By: | International Monetary Fund. |
| Abstract: | Prior to this mission, two Monetary and Capital Markets (MCM) Department IMF missions visited Ljubljana during December 15–19, 2014 and July 9–20, 2015 to assist the Slovenian authorities in introducing an effective framework for contingency planning and crisis management (CPCM), including bank resolution and deposit guarantee. As a result of the 2014 mission, two follow-up missions were planned on: (i) bank resolution and deposit insurance; and (ii) CPCM. This report documents the findings of the second follow-up mission. It should be read in conjunction with the reports of the previous two missions—information that was shared in the previous reports is not repeated in this report. |
| Keywords: | Banking sector;Financial crisis;Bank resolution;Deposit insurance;Risk management;Technical Assistance Reports;Slovenia; |
| Date: | 2016–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:16/286&r=ias |
| By: | Frank N. Caliendo; Maria Casanova; Aspen Gorry; Sita Slavov |
| Abstract: | Uncertainty about the timing of retirement is a major financial risk with implications for decision making and welfare over the life cycle. Our conservative estimates of the standard deviation of the difference between retirement expectations and actual retirement dates range from 4.28 to 6.92 years. This uncertainty implies large fluctuations in total wage income. We find that individuals would give up 2.6%-5.7% of total lifetime consumption to fully insure this risk and 1.9%-4.0% of lifetime consumption simply to know their actual retirement date at age 23. Uncertainty about the date of retirement helps to explain consumption spending near retirement and precautionary saving behavior. While social insurance programs could be designed to hedge this risk, current programs in the U.S. (OASI and SSDI) provide very little timing insurance. |
| JEL: | C61 E21 H55 J26 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22609&r=ias |
| By: | Dieterle, Steven; Bartalotti, Otávio C.; Brummet, Quentin O. |
| Abstract: | We reassess the literature using county border pair identification strategies to examine the effects of UI benefit duration on labor market conditions. We extend these previous approaches using a regression discontinuity-based approach that controls for changes in unobservables by distance to the border and accounts for measurement error induced by using county-level aggregates. Our new results provide no evidence of a large change in unemployment induced by differences in UI generosity across state boundaries, bringing the evidence from border-based identification strategies in line with estimates from other strands of the UI benefit duration literature. |
| Date: | 2016–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genstf:3392&r=ias |
| By: | Kayleigh Barnes; Arnab Mukherji; Patrick Mullen; Neeraj Sood |
| Abstract: | This paper estimates the impact of social health insurance on financial risk reduction by utilizing data from a natural experiment created by the phased roll out of a social health insurance program for the poor in India. We estimate the impact of insurance on the distribution of out-of-pocket costs, frequency and amount of money borrowed for health reasons, and the likelihood of incurring catastrophic health expenditures. We use a stylized expected utility model to compute the welfare effects associated with changes due to insurance in the distribution of out-of-pocket costs. We adjust the standard model to account for the unique conditions of a developing country by incorporating consumption floors, informal borrowing, and selling of assets. These adjustments allow us to estimate the value of financial risk reduction from both consumption smoothing and asset protection channels. Our results show that social insurance reduces out-of-pocket costs with larger effects in the higher quantiles of the out-of-pocket cost distribution. In addition, we find a reduction in the frequency and amount of money borrowed for health reasons. Finally, we find that the value of financial risk reduction outweighs the total per household cost of the social insurance program by two to five times. |
| JEL: | H0 H4 H51 I1 I13 I15 I3 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:22620&r=ias |
| By: | Soetevent, Adriaan; Hinloopen, Jeroen (Groningen University) |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:gro:rugsom:16009-eef&r=ias |
| By: | Titeca, Hannes |
| Abstract: | Healthcare systems differ greatly across the world, however, it appears that the extent of public insurance (publicly/government funded healthcare) is the only institutional characteristic that plays a significant role in accounting for the large disparities in total healthcare spending. Other factors, such as whether healthcare services are provided by the private or public sector, play much less of a role, highlighting the important distinction between how services are provided and how those services are funded. A regression analysis is conducted utilising an existing categorisation of the predominately high-income countries of the OECD in 2009. It is found that more public insurance and less private insurance is associated with significantly lower spending after controlling for differences in income through GDP and healthcare quality/outcomes through life expectancy. This result is robust to the inclusion of additional controls for lifestyle factors and the proportion of the population aged 65 and over, as well as the inclusion or exclusion of the US that could otherwise be seen as some kind of outlier. A typical country relying largely on private provision and insurance, such as the Netherlands, Germany or the US, could reduce total healthcare spending by around a third by moving to a system with extensive public insurance whilst retaining extensive private provision of services, a situation typical of some countries such as Austria, Greece and Japan. |
| Keywords: | healthcare systems; healthcare spending; healthcare expenditure; healthcare institutions; international comparison; regression analysis; private; public; health insurance; institutional differences; health care spending; health care institutions; health care expenditure |
| JEL: | D02 H51 I1 I11 I13 I18 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73678&r=ias |
| By: | Hans Gersbach (ETH Zurich, Switzerland); Volker Britz (ETH Zurich, Switzerland); Hans Haller (Virginia Polytechnic Institute) |
| Abstract: | We study the consequences and optimal design of bank deposit insurance in a general equilibrium model. The model involves two production sectors. One sector is financed by issuing bonds to risk-averse households. Firms in the other sector are monitored and financed by banks. Households fund banks through deposits and equity. Deposits are explicitly insured by a de- posit insurance fund. Any remaining shortfall is implicitly guaranteed by the government. The deposit insurance fund charges banks a premium per unit of deposits whereas the government finances any necessary bail-outs by lump-sum taxation of households. When the deposit insurance premium is actuarially fair or higher than actuarially fair, two types of equilibria emerge: One type of equilibria supports the socially optimal (Arrow-Debreu) allo- cation, and the other type does not. In the latter case, bank lending is too large relative to equity and the probability that the banking system collapses is positive. Next, we show that a judicious combination of deposit insurance and reinsurance eliminates all non-optimal equilibrium allocations. |
| Keywords: | Financial intermediation, deposit insurance, capital structure, general equilibrium, reinsurance |
| JEL: | D53 E44 G2 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:eth:wpswif:16-258&r=ias |