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on Insurance Economics |
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Issue of 2018‒02‒26
thirteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Kyyrä, Tomi; Pesola, Hanna; Rissanen, Aarne |
| Abstract: | The goal of this report is twofold. The first is to provide an overview of the Finnish unemployment insurance (UI) system. We describe all major changes in eligibility criteria, benefit levels and benefit durations since 2000. We also assess how these have changed the overall generosity of the benefit scheme over time. The second is to summarize what we know about the effects of UI benefits in the context of the Finnish labor market. For background we provide a brief look at the economic theory of UI, but our main focus is on empirical evidence on behavioral responses. We survey the existing evidence and present some new results for the effects of eligibility criteria, benefit levels and benefit durations on labor market outcomes in Finland. |
| Keywords: | Unemployment insurance, layoffs, unemployment, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fer:resrep:184&r=ias |
| By: | Michael Darden; Ian McCarthy; Eric Barrette |
| Abstract: | A longstanding debate in health economics and health policy concerns how hospitals adjust prices with private insurers following reductions in public funding. A common argument is that hospitals engage in some degree of "cost-shifting," wherein hospitals increase prices with private insurers in response to a reduction in public payments; however, evidence of significant cost-shifting is mixed, and the rationale for such behavior is unclear. We enter this debate by examining plausibly exogenous variation in Medicare payment rates generated by two policies under the Affordable Care Act: the Hospital Readmission Reduction Program (HRRP) and the Hospital Value Based Purchasing (HVBP) program. We merge rich hospital-level information to actual private-payer payment data from a large, multi-payer database. Our data include roughly 50% of inpatient prospective payment hospitals in the United States from 2010 to 2015. We find that hospitals that faced net payment reductions from HRRP and HVBP were able to negotiate 1.5% higher average private payments - approximately $155 extra for the average acute care claim, or $82,000 per hospital, based on an average hospital penalty of nearly $146,000. We find the largest increases in payments for circulatory system (2.7%) and nervous system (3.2%) claims. We also find significant heterogeneity by payer mix, where cost-shifting is largest for hospitals with higher shares of private insurance patients. |
| JEL: | I11 I18 L2 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24304&r=ias |
| By: | Daniel Garcia; Roee Teper; Matan Tsur |
| Abstract: | This paper characterizes the optimal information structure in competitive insurance markets with adverse selection. A regulator assigns ratings to individuals according to their risk characteristics, insurers offer fixed insurance contracts to each rating group, and the market clears as in Akerlof (1970). The optimal rating system minimizes ex-ante risk subject to participation constraints. We prove that in any such market there exists a unique optimal system under which all individuals trade and the ratings match low risk types with high risk types negative assortatively. A simple algorithm yields the optimal system. We examine implications for government regulations of insurance markets. |
| Keywords: | insurance markets, adverse selection, information design |
| JEL: | D82 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6853&r=ias |
| By: | Elliott Fan (Department of Economics, National Taiwan University); Hsienming Lien (Department of Public Finance, National Chengchi University); Ching-to Albert Ma (Boston University) |
| Abstract: | Taiwanese Labor, Government Employee, and Farmer Insurance programs provide 5-6 months of salary to enrollees who undergo hysterectomy or oophorectomy before their 45th birthday. These programs result in more and earlier treatments, referred as, respectively, inducement and timing effects. Difference-in-difference and nonparametric methods are used to estimate these effects on surgery hazards between 1997 and 2011. For Government Employee and Labor Insurance, inducement is 11-12% of all hysterectomies, and timing 20% of inducement. For oophorectomy, both effects are insignificant. Induced hysterectomies increase benefit payments and surgical costs, at about the cost of a mammogram and 5 pap smears per enrollee. |
| Keywords: | disability insurance, moral hazard, hysterectomy, oophorectomy |
| JEL: | I00 I10 I12 I18 |
| Date: | 2017–10 |
| URL: | http://d.repec.org/n?u=RePEc:bos:wpaper:wp2018-001&r=ias |
| By: | Giovanni di Iasio; Zoltan Pozsar |
| Abstract: | We build a moral hazard model to study incentives of financial intermediaries (shortly, bankers) facing a leverage-insurance trade-off in their investment choice. We demonstrate that the choice is affected by two recent transformations of the financial ecosystem bankers inhabit: (i) the rise of institutional savers, such as treasurers of global corporations, which manage huge balances in need for parking space and (ii) the proliferation of balance sheets with asset-liability mismatch, like those of insurance companies and pension funds (ICPFs), which allocate capital to bankers to reach for yield and meet their liabilities offering guaranteed returns. Bankers supply parking space to institutional savers and deliver leverageenhanced returns to ICPFs. When the demand for parking space and the mismatch which ICPFs must bridge are large, the equilibrium allocation is characterized by high leverage and financial crises. We show that post-crisis regulatory reforms, while improving the resiliency of the regulated banking sector, create room for bank disintermediation and do not unambiguously limit systemic risks which can build up in the asset management complex. Both transformations indeed stem from real economy developments (e.g. population ageing, global imbalances, income and wealth inequality, increased sophistication of tax arbitrage). Fiscal and structural reforms that directly address the real economy roots of those secular developments are then essential to complement financial and banking regulations and promote financial stability and balanced growth. JEL Classification: G01, G23, G28 |
| Keywords: | Shadow banking, Institutional savers, Insurance companies and pension funds, Financial crisis, Leverage, Liquidity, Reach for yield |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:201760&r=ias |
| By: | Blundell, Richard (University College London); Pistaferri, Luigi (Stanford University); Saporta-Eksten, Itay (Tel Aviv University) |
| Abstract: | We consider the life cycle choices of a household that in each period decides how much to consume and how to allocate spouses' time to work, leisure, and childcare. In an environment with uncertainty, the allocation of goods and time over the life cycle also serves the purpose of smoothing marginal utility in response to shocks. We combine data on consumption, spouses' wages, hours of work, and time spent with children to estimate the sensitivity of consumption and time allocation to transitory and permanent wage shocks. These structural parameters describe the ability of household to self-insure in response to shocks. We find that behavioral responses to wage shocks depend on the presence of young children. We also find that labor supply cross-responses depend on three counteracting forces: complementarity of leisure time, substitutability of time in the production of child services, and added worker effects. |
| Keywords: | family labor supply, time use, consumption smoothing |
| JEL: | J22 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11237&r=ias |
| By: | Haan, Peter (DIW Berlin); Kemptner, Daniel (DIW Berlin); Prowse, Victoria L. (Purdue University) |
| Abstract: | In this paper, we study how the tax-and-transfer system reduces the inequality of lifetime income by redistributing lifetime earnings between individuals with different skill endowments and by providing individuals with insurance against lifetime earnings risk. Based on a dynamic life-cycle model, we find that redistribution through the tax-and -transfer system offsets around half of the inequality in lifetime earnings that is due to differences in skill endowments. At the same time, taxes and transfers mitigate around 60% of the inequality in lifetime earnings that is attributable to employment and health risk. Progressive taxation of annual earnings provides little insurance against lifetime earnings risk. The lifetime insurance effects of taxation may be improved by moving to a progressive tax on lifetime earnings. Similarly, the lifetime insurance and redistributive effects of social assistance may be improved by requiring wealthy individuals to repay any social assistance received when younger. |
| Keywords: | lifetime earnings, lifetime income, tax-and-transfer system, taxation, unemployment insurance, disability benefits, social assistance, inequality, redistribution, insurance, endowments, risk, dynamic life-cycle models |
| JEL: | D63 H23 I24 I38 J22 J31 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11275&r=ias |
| By: | Petrunyk, Inna (Leuphana University Lüneburg); Pfeifer, Christian (Leuphana University Lüneburg) |
| Abstract: | This paper explores the effects of a major reform of unemployment benefits in Germany on the labor market outcomes of individuals with some health impairment. The reform induced a substantial reduction in the potential duration of regular unemployment benefits for older workers. This work analyzes the reform in a wider framework of institutional interactions, which allows us to distinguish between its intended and unintended effects. Our results provide causal evidence for a significant decrease in the number of days in unemployment benefits and increase in the number of days in employment. However, they also suggest a significant increase in the number of days in unemployment assistance, granted upon exhaustion of unemployment benefits. Transitions to unemployment assistance represent an unintended effect, limiting the success of a policy change that aims to increase labor supply via reductions in the generosity of the unemployment insurance system. |
| Keywords: | policy evaluation, labor market reform, unemployment insurance, difference-in-differences |
| JEL: | I1 J2 J65 |
| Date: | 2018–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11300&r=ias |
| By: | Timothy Halliday (University of Hawaii); Bhashkar Mazumder (Federal Reserve Bank of Chicago); Ashley Wong (Northwestern University) |
| Abstract: | Studies of intergenerational mobility have largely ignored health despite the central importance of health to welfare. We present the first estimates of intergenerational health mobility in the US by using repeated measures of self-reported health status (SRH) during adulthood from the PSID. Our main finding is that there is substantially greater health mobility than income mobility in the US. A possible explanation is that social institutions and policies are more effective at disrupting intergenerational health transmission than income transmission. We further show that health and income each capture a distinct dimension of social mobility. We also characterize heterogeneity in health mobility by child gender, parent gender, race, education, geography and health insurance coverage in childhood. We find some important differences in the patterns of health mobility compared with income mobility and also find some evidence that there has been a notable decline in health mobility for more recent cohorts. We use a rich set of background characteristics to highlight potential mechanisms leading to intergenerational health persistence. |
| Keywords: | Health, mobility, Inequality, health insurance, intergenerational mobility, intergenerational transmission |
| JEL: | I10 I14 J62 I13 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2018-009&r=ias |
| By: | Joseph P. Newhouse; Mary Beth Landrum; Mary Price; J. Michael McWilliams; John Hsu; Thomas McGuire |
| Abstract: | We ascertain the degree of service-level selection in Medicare Advantage (MA) using individual level data on the 100 most frequent HCC’s or combination of HCC’s from two national insurers in 2012-2013. We find differences in the distribution of beneficiaries across HCC’s between TM and MA, principally in the smaller share of MA enrollees with no coded HCC, consistent with greater coding intensity in MA. Among those with an HCC code, absolute differences between MA and TM shares of beneficiaries are small, consistent with little service-level selection. Variation in HCC margins does not predict differences between an HCC’s share of MA and TM enrollees, although one cannot a priori sign a relationship between margin and service-level selection. Margins are negatively associated with the importance of post-acute care in the HCC. Margins among common chronic disease classes amenable to medical management and typically managed by primary care physicians are larger than among diseases typically managed by specialists. These margin differences by disease are robust against a test for coding effects and suggest that the average technical efficiency of MA relative to TM may vary by diagnosis. If so, service-level selection on the basis of relative technical efficiency could be welfare enhancing. |
| JEL: | I11 I13 I18 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24289&r=ias |
| By: | Robert W. Fairlie; Peter Riley Bahr |
| Abstract: | This paper provides the first evidence on the earnings, employment and college enrollment effects of computers and acquired skills from a randomized controlled trial providing computers to entering college students. We matched confidential administrative data from California Employment Development Department (EDD)/Unemployment Insurance (UI) system earnings records, the California Community College system, and the National Student Clearinghouse to all study participants for seven years after the random provision of computers. The experiment does not provide evidence that computer skills have short- or medium-run effects on earnings. These null effects are found along both the extensive and intensive margins of earnings (although the estimates are not precise). We also do not find evidence of positive or negative effects on college enrollment. A non-experimental analysis of CPS data reveals large, positive and statistically significant relationships between home computers, and earnings, employment and college enrollment, raising concerns about selection bias in non-experimental studies. |
| JEL: | I23 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24276&r=ias |
| By: | Samia Laokri |
| Abstract: | There is a massive global momentum to progress toward the sustainable development and universal health coverage goals. However, effective policies to health-care coverage can only emerge through high-quality services delivered to empowered care users by means of strong local health systems and a translational standpoint. Health policies aimed at removing user fees for a defined health-care package may fail at reaching desired results if not applied with system thinking. |
| Keywords: | evidence-based integrated care; public–private partnerships; research-based guidance; system thinking; translational research; tuberculosis; universal health coverage; use of knowledge |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/266714&r=ias |
| By: | Gordon B. Dahl; Anne C. Gielen |
| Abstract: | Does participation in a social assistance program by parents have spillovers on their children's own participation, future labor market attachment, and human capital investments? While intergenerational concerns have figured prominently in policy debates for decades, causal evidence is scarce due to nonrandom participation and data limitations. In this paper we exploit a 1993 policy reform in the Netherlands which tightened disability insurance (DI) criteria for existing claimants, and use rich panel data to link parents to children's long-run outcomes. The key to our regression discontinuity design is that the reform applied to younger cohorts, while older cohorts were exempted from the new rules. We find that children of parents who were pushed out of DI or had their benefits reduced are 11% less likely to participate in DI themselves, do not alter their use of other government safety net programs, and earn 2% more in the labor market as adults. The combination of reduced government transfers and increased tax revenue results in a fiscal gain of 5,900 euros per treated parent due to child spillovers by 2014. Moreover, children of treated parents complete an extra 0.12 years of schooling on average, an investment consistent with an anticipated future with less reliance on DI. Our findings have important implications for the evaluation of this and other policy reforms: ignoring parent-to-child spillovers understates the long-run cost savings of the Dutch reform by between 21 and 40% in present discounted value terms. |
| JEL: | H53 I38 J62 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24296&r=ias |