nep-ias New Economics Papers
on Insurance Economics
Issue of 2017‒12‒11
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Affordable Care Act Medicaid Expansions and the Impact on Nurses By Michael DiNardi
  2. Sweden; Financial Sector Assessment Program-Technical Note-Insurance Sector Regulation and Supervision By International Monetary Fund
  3. Japan; Financial Sector Assessment Program-Technical Note-Insurance Sector Regulation and Supervision By International Monetary Fund
  4. Price-Linked Subsidies and Health Insurance Markups By Sonia Jaffe; Mark Shepard
  5. Is Working Longer a Good Prescription for All? By Geoffrey T. Sanzenbacher; Steven A. Sass
  6. Systemic risk in insurance: Towards a new approach By Berdin, Elia; Sottocornola, Matteo
  7. Equilibrium unemployment as a worker insurance device: Worker insurance and wage setting in worker owned enterprises By Marina Albanese; Cecilia Navarra; Ermanno Tortia
  8. Equilibrium unemployment as a worker insurance device: Wage setting in worker owned enterprises By Marina ALBANESE; Cecilia NAVARRA; Ermanno TORTIA
  9. Luxembourg: Financial Sector Assessment Program; Technical Note-Managing Problem Banks and Systemic Banking Crises By International Monetary Fund

  1. By: Michael DiNardi
    Abstract: Shortages in healthcare labor markets and decreases in quality of care were major concerns voiced by critics of the 2010 Patient Protection and Affordable Care Act. I use the 2014 expansions in Medicaid coverage as a plausibly exogenous increase in the demand for nurses to estimate the effects on nurse labor market outcomes and quality of care measures. Using a difference-in-differences strategy, I find the 2014 Medicaid expansions increased nursesâ weekly hours worked by 1.5 percent (0.55 hours). Increases in hours worked are larger for rural nurses, likely due to larger increases in insurance coverage in rural areas from the Medicaid expansions. In disaggregated analyses, employment of licensed practical nurses increased by 15 percent, but I do not find any statistically significant effects on registered nurse employment. Weekly hours worked increased by 2.4 percent (0.89 hours) for licensed practical nurses and by 1.2 percent for registered nurses (0.46 hours). I do not find any consistent negative effects on quality of care as measured by patient ratings of nursing care and hospital-acquired infection rates.
    JEL: I13 I18 J23
    Date: 2017–11–30
  2. By: International Monetary Fund
    Abstract: This technical note provides an assessment of the development of regulation and supervision of the Swedish insurance sector since the Financial Sector Assessment Program (FSAP) in 2011. The note is part of the 2016 FSAP for Sweden. The insurance sector is characterized by a large number of companies, high concentration, and the predominance of occupational pensions insurance. The five largest life companies, including providers of large collective pension arrangements for industry and labor organizations, account for over 50 percent of life sector assets and the largest four non-life companies for 80 percent of total non-life gross premium income. Most life insurance products offer a savings component. Occupational pensions dominate, now written almost entirely on a defined contribution basis. Sales of unit-linked products have been growing, but traditional products remain popular because they continue to offer guarantees, although at levels now aligned to prevailing low interest rates. With a relatively large duration gap and high levels of past business with guarantees, the life sector remains exposed to low interest rates, more so in combination with a fall in equity or real estate markets, where insurers hold significant investments.
    Keywords: Europe;Sweden;
    Date: 2017–10–05
  3. By: International Monetary Fund
    Abstract: The Japanese insurance sector is characterized by a mature market, high concentration, and the predominance of life insurance products with interest guarantees. The insurance sector represents 13 percent of total financial sector assets. Life insurance is about 12 times the size of non-life by assets. Five largest life insurers, three of which are mutual in structure, account for 67 percent of life insurance sector assets; and the four largest non-life insurers 88 percent of non-life insurance sector assets. Japan Post Insurance is the largest life insurer with 22 percent market share by assets. Most of savings-type products (whole life and endowment) have interest guarantees. While insurers have reduced the guarantees over the years, there are still old policies in force with guarantees in excess of 5 percent according to industry sources.
    Keywords: Asia and Pacific;Japan;
    Date: 2017–09–18
  4. By: Sonia Jaffe (Becker Friedman Institute For Research in Economics); Mark Shepard (Harvard University)
    Abstract: Subsidies in many health insurance programs depend on prices set by competing insurers – as prices rise, so do subsidies. We study the economics of these “price-linked” subsidies compared to “fixed” subsidies set independently of market prices. We show that price-linked subsidies weaken competition, leading to higher markups and raising costs for the government or consumers. However, price-linked subsidies have advantages when insurance costs are uncertain and optimal subsidies increase as costs rise. We evaluate this tradeoff empirically using a model estimated with administrative data from Massachusetts’ health insurance exchange. Relative to fixed subsidies, price-linking increases prices by up to 6% in a market with four competitors, and about twice as much when we simulate markets with two insurers. For levels of cost uncertainty reasonable in a mature market, we find that the losses from higher markups outweigh the benefits of price-linking.
    Keywords: health insurance, health care pricing
    JEL: I11 I13 L11
    Date: 2017–11
  5. By: Geoffrey T. Sanzenbacher; Steven A. Sass
    Abstract: Working longer is one of the most effective ways to improve prospects for a secure retirement. It increases monthly Social Security benefits, allows more time for saving in 401(k)s, and shortens the period of retirement that assets need to cover. Working longer is also widely seen as a reasonable response, because people are living longer and healthier lives. The question is whether this prescription is realistic for individuals across the socioeconomic spectrum. This brief addresses this question by synthesizing the findings of a series of five recent studies conducted by the Center, using educational attainment as the measure of socioeconomic status (SES).1 The brief proceeds as follows. The first section addresses whether it is reasonable to expect lower-SES individuals to work longer by examining recent patterns in life expectancy gains. The findings suggest that working somewhat longer is reasonable, so the rest of the brief focuses on the feasibility of this option for the lower-SES group. The second section explores whether lower-SES individuals currently plan to work long enough to achieve retirement security. The third section analyzes whether job switching can help workers extend their careers, while the fourth section explores the breadth of job options available to those who do switch. The fifth section examines whether reducing the health insurance costs of older workers can improve their labor force prospects. The final section concludes that less-educated workers could clearly benefit from extending their worklives but they face narrower options than their better-educated counterparts. Therefore, society may need to find remedies, other than working longer alone, that allow lower-SES households to secure an adequate retirement income.
    Date: 2017–11
  6. By: Berdin, Elia; Sottocornola, Matteo
    Abstract: Financial stability can be intended as the state whereby the build-up of systemic risk is prevented along with consequent major disruptions in financial markets that could have potential negative effects on the real economy. It follows that financial stability is considered a prerequisite for a sustainable economic growth (Dudley, 2011) and the empirical evidence suggests that an instable financial system can have indeed a negative impact on economic growth (Creel et al., 2015). A growing body of literature provides evidence that among financial institutions, insurers do pose systemic risk although less than banks. Thus, it follows that insurers can also be a source of financial instability that in turn can create significant dislocation on the economic activity. Against this background, it is important to have in place a set of regulatory and supervisory tools that aim to enhance and preserve financial stability across the entire financial system. Such regulatory and supervisory tools might be adopted following a twofold approach: on the one hand, the completion of existing microprudential frameworks with tools that embed macroprudential features, i.e. the current Solvency II regime as an example (Christophersen and Zschiesche, 2015); on the other hand, the adoption of a macroprudential framework designed to take into account the characteristics of the insurance business, complemented by a set of additional measures designed to take into account the specific characteristics of other financial institutions, primarily banks. In this short letter, we mainly focus on the latter aspect, although the design of a macroprudential framework inevitably foresees macroprudential features into microprudential frameworks, thereby blurring the separating line between the two approaches.
    Keywords: systemic risk,macroprudential franework,insurance,financial stability
    Date: 2017
  7. By: Marina Albanese; Cecilia Navarra; Ermanno Tortia
    Abstract: Shapiro and Stiglitz model on efficiency wages shows that worker owned firms perform higher levels of wage and employment than in investor owner firms, but empirical evidence doesn’t support the first result. Starting by the economic literature on workers cooperatives we extend the Shapiro and Stiglitz’s analysis by introducing horizontal control among worker members and employer opportunism. Our results reconcile theory and empirical record showing how in cooperatives both unemployment and wages can be lower than in investor owned companies.
    Keywords: efficiency wage; contract failure; asymmetric information; moral hazard; worker owned enterprises
    JEL: D21 D86 J31 J54 J64
    Date: 2017
  8. By: Marina ALBANESE (University of Naples, Italy); Cecilia NAVARRA (The Nordic Africa Institute, Sweden); Ermanno TORTIA (University of Trento, Italy)
    Abstract: Worker cooperatives are shown to provide higher level of employment, higher employment stability and often greater wage volatility than similar investor-owned firms. A stylized fact that is nevertheless largely unexplained by the literature is the frequent evidence of lower wages in worker managed firms. To engage in the explanation of this fact, we use the Shapiro and Stiglitz (1984) model on efficiency wages and unemployment as a discipline device. Given more efficient monitoring and the absence of wage premiums compensating the expected costs of contract failures, we show that efficiency wages in cooperatives are lower than in investor owned firms while employment is confirmed to be always higher. Our result is due to the informational advantage enjoyed by the firm’s owners, which imply a compensation requested by workers for employer opportunism, and to the role of horizontal control among workers, which reduces the equilibrium level of wages. We conclude that the S-S (1984) result, as applied to worker cooperatives, is a special case of a wider class of equilibria in the presence of contractual imperfections in the agency relation and that different ownership forms can differently impact the unemployment level.
    Keywords: efficiency wage; contract failure; asymmetric information; moral hazard; worker owned enterprises
    JEL: D21 D86 J31 J54 J64
    Date: 2017–05
  9. By: International Monetary Fund
    Abstract: The landscape for managing problem banks in Luxembourg has changed fundamentally in recent years. As part of the euro area, Luxembourg is now part of a “Banking Union” (BU) where the European Central Bank (ECB) has exclusive competence to directly supervise significant institutions (SIs) while the Commission de Surveillance du Secteur Financier (CSSF), under the oversight of the ECB, directly supervises less significant institutions (LSIs). Competences for bank resolution are shared between the Single Resolution Board (SRB) and the CSSF. By transposing the BRRD and DGSD in late 2015, the authorities introduced a new resolution framework and a public deposit insurance scheme. The Resolution Board and the Depositor Protection Council were established within the CSSF to carry out resolution and administer the deposit insurance scheme respectively.
    Keywords: Europe;Luxembourg;
    Date: 2017–08–28

This nep-ias issue is ©2017 by Soumitra K. Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.