nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒11‒05
ten papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Asymmetries in Earnings, Employment and Wage Risk in Great Britain By Konstantinos Angelopoulos; Spyridon Lazarakis; Jim Malley
  2. Nitpicky Insurers and the Law of Contracts By Jean-Marc Bourgeon; Pierre Picard
  3. Bismarck's Health Insurance and the Mortality Decline By Stefan Bauernschuster; Anastasia Driva; Erik Hornung
  4. A Dose of Managed Care: Controlling Drug Spending in Medicaid By David Dranove; Christopher Ody; Amanda Starc
  5. Pregnancy Medicaid Expansions and Fertility: Differentiating between the Intensive and Extensive Margins By Lincoln Groves; Sarah Hamersma; Leonard M. Lopoo
  6. Unintended Consequences of Unemployment Insurance: Evidence from Stricter Eligibility Criteria in Brazil By Cristiano C. Carvalho; Raphael Corbi, Renata Narita
  7. State Medicaid and Health Consulting Services (About Us) By Mathematica Policy Research
  8. Shadow Banking and Financial Stability under Limited Deposit Insurance By Voellmy, Lukas
  9. Farm families and the affordable care act By Bartholomae, Suzanne; Taylor, Susan
  10. Offset Contracts as an Insurance Device in Building the National Security By Vesa Kanniainen; Juha-Matti Lehtonen

  1. By: Konstantinos Angelopoulos; Spyridon Lazarakis; Jim Malley
    Abstract: This paper examines the relationship between idiosyncratic risk in labour income and fluctuations in aggregate labour market quantities for Great Britain. We use data from the British Household Panel Survey (BHPS) for 1991-2008 and from the BHPS sub-sample of Understanding Society for 2010-2014. We measure idiosyncratic risk in labour income by the relevant moments of the distributions of earnings, employment and wage shocks across individuals. Our main finding is that idiosyncratic risk increases during contractions in the labour market. Furthermore, we find evidence of insurance, both at the household level and in the form of public insurance. However, private and public insurance mechanisms against an increase in idiosyncratic risk are less e¤ective for households whose head does not hold a University degree.
    Keywords: idiosyncratic income risk, employment, social insurance policy
    JEL: D31 E24 J31
    Date: 2017
  2. By: Jean-Marc Bourgeon; Pierre Picard
    Abstract: The standard economic analysis of the insured-insurer relationship under moral hazard postulates a simplistic setup that hardly explains the many features of an insurance contract. We extend this setup to include the situation that the insured was facing at the time of the accident and the circumstances of the loss. We show that if this information is costlessly observable, then it should be included in the contract to improve the risk sharing-incentive trade-off under moral hazard. However, in practice the insurer observes the circumstances of the loss only in particular cases - most of the time by performing a costly audit - and almost never the situation the insured was facing at the time of the accident. The resulting incompleteness of the contract opens the door to controversies and disputes that may lead to judicial procedures. We show how the law of insurance contracts should allow insurers to incentivize policyholders to exert an adequate level of effort, and, at the same time, to limit their propencity to nitpick.
    Keywords: insurance, moral hazard, incomplete contracts
    JEL: D82 D86 G22
    Date: 2017
  3. By: Stefan Bauernschuster; Anastasia Driva; Erik Hornung
    Abstract: We investigate the impact on mortality of the world’s first compulsory health insurance, established by Otto von Bismarck, Chancellor of the German Empire, in 1884. Employing a multi-layered empirical setup, we draw on international comparisons and difference-in-differences strategies using Prussian administrative panel data to exploit differences in eligibility for insurance across occupations. All approaches yield a consistent pattern suggesting that Bismarck’s Health Insurance generated a significant mortality reduction. The results are largely driven by a decline of deaths from infectious diseases. We present prima facie evidence that diffusion of new hygiene knowledge through physicians was an important channel.
    Keywords: health insurance, mortality, demographic transition, Prussia
    JEL: I13 I18 N33 J11
    Date: 2017
  4. By: David Dranove; Christopher Ody; Amanda Starc
    Abstract: Effectively designed market mechanisms may reduce growth in health care spending. In this paper, we study the impact of privatizing the delivery of Medicaid drug benefits on drug spending. Exploiting granular data that allow us to examine drug utilization, we find that drug spending would fall by 22.4 percent if the drug benefit was fully administered by Medicaid Managed Care Organizations (MCOs), largely through lower point-of-sale prices and greater generic usage. The effects are driven by MCOs’ ability to design drug benefits and steer consumers toward lower cost drugs and pharmacies. MCOs do not appear to skimp on performance, either by reducing overall drug consumption as measured by prescriptions per enrollee or reducing utilization of drugs that offset other medical spending.
    JEL: I11 I13 L10
    Date: 2017–10
  5. By: Lincoln Groves (Institute for Research on Poverty, University of Wisconsin-Madison); Sarah Hamersma (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244); Leonard M. Lopoo (Center for Policy Research, Maxwell School, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244)
    Abstract: The theoretical and empirical links between public health insurance access and fertility in the United States remain unclear. Utilizing a demographic cell-based estimation approach with panel data (1987-1997), we revisit the large-scale Medicaid expansions to pregnant women during the 1980s to estimate the heterogeneous impacts of public health insurance access on childbirth. While the decision to become a parent (i.e., the extensive margin) appears to be unaffected by increased access to Medicaid, we find that increased access to public health insurance positively influenced the number of high parity births (i.e., the intensive margin) for select groups of women. In particular, we find a robust, positive birth effect for unmarried women with a high school education, a result which is consistent across the two racial groups examined in our analysis: African American and white women. This result suggests that investigating effects along both the intensive and extensive margin is important for scholars who study the natalist effects of social welfare policies, and our evidence provides a more nuanced understanding of the influence of public health insurance on fertility.
    Keywords: Medicaid, Fertility, Parity
    JEL: I1 J13 J18
    Date: 2017–08
  6. By: Cristiano C. Carvalho; Raphael Corbi, Renata Narita
    Abstract: This paper investigates the impact of changes in the eligibility criteria of unemploy- ment benefits (UI) on layoffs in Brazil. We exploit exogenous variation introduced by a reform in the UI system in 2015. Our difference-in-differences estimates show that UI accounts for 11 − 13% of the average dismissal rates of eligible workers. Our results are consistent with workers having the incentive to strategically induce their dismissals in order to collect UI benefits.
    Keywords: unemployment insurance; labor legislation; job turnover; layoffs
    JEL: J63 J64 J65
    Date: 2017–10–23
  7. By: Mathematica Policy Research
    Abstract: In the rapidly changing health care environment, states have a great need and opportunity to use data to improve the efficiency and effectiveness of Medicaid and other health programs.
    Keywords: State Medicaid, Health Consulting Services
    JEL: I
  8. By: Voellmy, Lukas
    Abstract: This paper proposes a new theory of shadow banking that highlights the role of the cap on deposit insurance at traditional banks. Very risk averse investors with large endowments (institutional cash-pools) are looking for the best alternative to insured bank deposits. This is provided by shadow banks that invest exclusively in assets with very low credit risk. In equilibrium, investors face a trade-off between shadow banks with low fundamental risk and commercial banks with low run risk.
    JEL: G2
    Date: 2017
  9. By: Bartholomae, Suzanne; Taylor, Susan
    Date: 2015–12–10
  10. By: Vesa Kanniainen; Juha-Matti Lehtonen
    Abstract: A dynamic multi-stage decision-theoretic approach is introduced to establish the optimal offset and its incidence, the contract price arising from bargaining, and the scale of the acquisition. A new rationale is suggested for offsets in terms of their role as an insurance devise. Results are derived for the pricing of delivery contracts subject to offset claims and their national security implications. It is shown that the national security is strictly convex in the offset transaction. As to the incidence of the offset, the offset claim is shown to be capitalised in the delivery price. The bargaining price is shown to depend on the value of the product to be delivered for the national security, the relative negotiation power of the contracting partners and the social cost of public funds. The analysis highlights the expectation effects of offsets on the bargaining price and the scale of delivery. The results aid in explaining why offsets are widely used in procurement contracts for defence materiel. As they contribute to the national security, they should be allowed to survive and not be denied under competition laws.
    Keywords: offsets, national security, defence material, insurance
    JEL: H12 H56
    Date: 2017

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