nep-ias New Economics Papers
on Insurance Economics
Issue of 2018‒03‒19
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The spike at benefit exhaustion in the Finnish labor market By Kyyrä, Tomi; Pesola, Hanna; Verho, Jouko
  2. The effect of weather index insurance on social capital: Experimental evidence from Ethiopia By Nigus, Halefom; Nillesen, Eleonora; Mohnen, Pierre
  3. Will Urban Migrants Formally Insure their Rural Relatives? Family Networks and Rainfall Index Insurance in Burkina Faso By Harounan Kazianga; Zaki Wahhaj
  4. A Unified Modeling Framework for Life and Non-Life Insurance By Francesca Biagini; Yinglin Zhang
  5. Taxation of Insurance By Vidar Christiansen
  6. Buffer-stock saving and households' response to income shocks By Giulio Fella; Serafin Frache
  7. The Impact of a Health Information Technology–Focused Patient-Centered Medical Neighborhood Program Among Medicare Beneficiaries in Primary Care Practices: The Effect on Patient Outcomes and Spending By Sean Orzol; Rosalind Keith; Mynti Hossain; Michael Barna; G. Greg Peterson; Timothy Day; Boyd Gilman; Laura Blue; Keith Kranker; Kate Stewart; Sheila Hoag; Lorenzo Moreno
  8. Share trading activity and the rise of the rentier in the UK before 1920 By Acheson, Graeme G.; Coyle, Christopher; Jordan, David P.; Turner, John D.
  9. Insuring entrepreneurial downside risk By Sumudu Kankanamge; Alexandre Gaillard
  10. Marriage, Labor Supply and the Dynamics of the Social Safety Net By Hamish Low; Costas Meghir; Luigi Pistaferri; Alessandra Voena
  11. Nonlinear Household Earnings Dynamics, Self-insurance, and Welfare By Mariacristina De Nardi; Giulio Fella; Gonzalo Paz Pardo

  1. By: Kyyrä, Tomi; Pesola, Hanna; Verho, Jouko
    Abstract: Many studies have found that the exit rate from unemployment increases in the vicinity of the exhaustion day of unemployment insurance benefits. The extent to which this spike is driven by job search behavior is important for assessing the distortionary effect of unemployment insurance. Card, Chetty and Weber (American Economic Review 2007; 97: 113–118) find a large spike in the exit rate from registered unemployment but only a very small spike in the job finding rate in Austria. We replicate their analysis using matched register data for Finland. We find a large spike also in the job finding rate at the time of benefit exhaustion, even though it is clearly smaller than the spike in the exit rate from unemployment benefits. In addition, we demonstrate difficulties in measuring the time to benefit exhaustion when the benefit entitlement can elapse at a reduced rate during activation measures or part-time working. Unless the remaining benefit entitlement is directly observed in the data, the resulting measurement error can lead to downward biased estimates of the spikes at benefit exhaustion.
    Keywords: unemployment benefit, unemployment duration, unemployment insurance, Social security, taxation and inequality, Labour markets and education, C41, J64, J65,
    Date: 2017
  2. By: Nigus, Halefom (UNU-MERIT); Nillesen, Eleonora (UNU-MERIT); Mohnen, Pierre (UNU-MERIT)
    Abstract: In this study, using data from lab-in-the-field experiment, we explore whether the introduction of weather index insurance crowds in or crowds out social capital in northern Ethiopia. We use contributions in the public good game as a measure of social capital. We find that weather index insurance crowds out social capital. The free-riding problem created by the positive externality of weather index insurance and development of self-sufficiency behaviour are found to be the causal mechanisms behind the crowding out phenomenon. Our results indicate that formal insurance mechanisms do not occur in a vacuum and may have unintended effects. Hence, this study suggests that novel insurance product design and marketing strategies should be used to ameliorate such unintended effects.
    Keywords: Weather index insurance, social capital, public goods game, Ethiopia
    JEL: C93 G22 H41 O17
    Date: 2018–02–19
  3. By: Harounan Kazianga (Oklahoma State University); Zaki Wahhaj (University of Kent)
    Abstract: We present findings from a pilot study exploring whether and how existing ties between urban migrants and rural farmers may be used to provide the latter improved access to formal insurance. Urban migrants in Ouagadougou (the capital of Burkina Faso) originating from nearby villages were offered, at the prevailing market price, a rainfall index insurance product that can potentially protect their rural relatives from adverse weather shocks. The product had an uptake of 22% during the two-week subscription window. Uptake rates were higher by 17-22 ppts among urban migrants who were randomly offered an insurance policy that would make pay-outs directly to the intended beneficiary rather than the subscriber. We argue that rainfall index insurance can complement informal risk-sharing networks by mitigating problems of informational asymmetry and self-control issues.
    Keywords: Microinsurance markets, Indexed insurance, Rainfall, Migration, Informal insurance networks
    JEL: O15 O16 G21
    Date: 2018–03–15
  4. By: Francesca Biagini; Yinglin Zhang
    Abstract: In this paper we propose for the first time a unified framework suitable for modeling both life and non-life insurance market, with nontrivial dependence with the financial market. We introduce a direct modeling approach, which generalizes the reduced-form framework for credit risk and life insurance. We apply these results for pricing insurance products in hybrid markets by taking into account the role of inflation under the benchmark approach. This framework offers at the same time a general and flexible structure, as well as explicit and treatable pricing formula.
    Date: 2018–02
  5. By: Vidar Christiansen
    Abstract: Should we exempt the services of insurance companies from VAT? Addressing this issue, the paper distinguishes between insurance against a general loss of resources and a loss of a specific commodity (property insurance). There is a case for exempting the former kind of insurance, but not the latter. Finally, comparing insurance through a producer warranty with insurance provided separately by an insurance company, it is conceivable that tax exemption of the latter will distort the choice of product quality.
    Keywords: insurance, warranties, value added tax, VAT exemptions
    JEL: H21
    Date: 2017
  6. By: Giulio Fella (Queen Mary University of London); Serafin Frache (Banco Central del Uruguay)
    Abstract: We use the Italian Survey of Household Income and Wealth, a rather unique dataset with a long time dimension of panel information on consumption, income and wealth, to structurally estimate a buffer-stock saving model. We exploit the information contained in the joint dynamics of income, consumption and wealth to quantify the degree of insurance against income risk implied by the estimated model. We find that Italian households insure between 89 and 95 percent of a transitory and between 7 and 9 percent of a permanent income shock. Our estimates are in line with empirical estimates for the same dataset, that do not impose any model structure on the consumption process. This suggests that Italian households do not have access to significant insurance beyond that implied by self-insurance.
    Keywords: Consumption, Wealth, Incomplete markets, Insurance
    JEL: D91 E21
    Date: 2017–07–20
  7. By: Sean Orzol; Rosalind Keith; Mynti Hossain; Michael Barna; G. Greg Peterson; Timothy Day; Boyd Gilman; Laura Blue; Keith Kranker; Kate Stewart; Sheila Hoag; Lorenzo Moreno
    Abstract: This paper estimates impacts of TransforMED’s HCIA-funded program on patient outcomes and Medicare parts A and B spending.
    Keywords: Health Information Technology, Patient Centered Medical Neighborhood, population heath management software, spending, service use
    JEL: I
  8. By: Acheson, Graeme G.; Coyle, Christopher; Jordan, David P.; Turner, John D.
    Abstract: Using a hand-collected dataset, we examine share trading activity over the period 1882 to 1920 for the North British and Mercantile Insurance Company, one of the largest UK companies of the time. Our main finding is that the steady flow of rentiers into the shareholding constituency of this company stymied share trading activity. Another important finding is that share trading still occurred during the closure of the Stock Exchange in 1914, but on a much-reduced scale. We also find that there was a substantial boom in share trading and in insurance stock prices after World War I.
    Keywords: Share trading,London Stock Exchange,Insurance,Investor,Rentier,World War I
    JEL: G12 N23 N24 N83 N84
    Date: 2018
  9. By: Sumudu Kankanamge (Toulouse School of Economics); Alexandre Gaillard (Toulouse School of Economics)
    Abstract: This paper examines the effects of entrepreneurial downside risk insurance on the level and composition of the entrepreneurial pool and to a larger extent on unemployment, production and welfare. We build a rich theoretical framework combining occupational choice, heterogenous agents and incomplete markets to address our main policy concerns. Using CPS, SCF and SBO data, we match our economy to fundamental empirical elements on unemployment, entrepreneurship and mobility and provide contributions on the transition between occupations with respect to individual ability such as matching the U-shaped curve of the transition from worker to self-employed or the hump-shaped curve of the reverse transition. Depending on the downside risk insurance policy considered, we find that this insurance can have a significative impact not only on the level of entrepreneurship but also on the firm size in the entrepreneurial pool and production, although the impact on unemployment is modest.
    Date: 2017
  10. By: Hamish Low; Costas Meghir; Luigi Pistaferri; Alessandra Voena
    Abstract: The 1996 PRWORA reform introduced time limits on the receipt of welfare in the United States. We use variation by state and across demographic groups to provide reduced form evidence showing that such limits led to a fall in welfare claims (partly due to “banking” benefits for future use), a rise in employment, and a decline in divorce rates. We then specify and estimate a life-cycle model of marriage, labor supply and divorce under limited commitment to better understand the mechanisms behind these behavioral responses, carry out counterfactual analysis with longer run impacts and evaluate the welfare effects of the program. Based on the model, which reproduces the reduced form estimates, we show that among low educated women, instead of relying on TANF, single mothers work more, more mothers remain married, some move to relying only on food stamps and, in ex-ante welfare terms, women are worse off.
    JEL: H2 H31 H53 J08 J12 J18 J22
    Date: 2018–02
  11. By: Mariacristina De Nardi; Giulio Fella; Gonzalo Paz Pardo
    Abstract: Earnings dynamics are much richer than typically assumed in macro models with heterogenous agents. This holds for individual-pre-tax and household-post-tax earnings and across administrative (Social Security Administration) and survey (Panel Study of Income Dynamics) data. We study the implications of two household-post-tax earnings processes in a standard life-cycle model: the canonical earnings process (that includes a persistent and a transitory shock) and a rich earnings dynamics process (that allows for age-dependence of moments, non-normality, and nonlinearity in previous earnings and age). Allowing for richer earnings dynamics implies a substantially better fit of the evolution of the cross-sectional consumption inequality over the life cycle and of the individual-level degree of consumption insurance against persistent earnings shocks. Richer earnings dynamics also imply lower welfare costs of earnings risk, but, as the canonical earnings process, do not generate enough concentration at the upper tail of the wealth distribution.
    JEL: E21 H21 J3
    Date: 2018–02

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