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on Insurance Economics |
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Issue of 2018‒03‒26
fifteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Steven A. Sass |
| Abstract: | Medicaid is generally not the first program that comes to mind when discussing government health care for older Americans. Its counterpart, Medicare, is the primary health insurance program for seniors of all income levels, while MedicaidÕs beneficiaries span a broad age range and typically have low incomes. However, Medicaid does offer critical benefits to many retirees and those approaching retirement. For eligible retirees, Medicaid provides insurance directly or pays their Medicare premiums and co-pays. It is also the single largest source of long-term care support for the elderly, covering about half of total spending on these services. Finally, in states that adopted the Medicaid expansion under the Affordable Care Act, the program insures about one out of six Americans approaching retirement. This brief offers a primer on the role of Medicaid for retirees and near-retirees. The discussion proceeds as follows. The first section reviews Medicaid benefits for the elderly, ages 65 and over. The second section reviews benefits for those approaching retirement, ages 50-64. The third section discusses how these groups, particularly those 65 and over, fit within the context of the larger Medicaid program. The final section concludes that the need for Medicaid benefits by older Americans will rise as the population ages and medical costs continue to increase faster than household incomes. Whether Medicaid meets this need depends on the outcome of the ongoing policy debate over the size and scope of the program. |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2018-5&r=ias |
| By: | Chao Fu (University of Wisconsin - Madison); Naoki Aizawa (University of Minnesota) |
| Abstract: | We study the design of public health insurance system and its equilibrium impacts on the labor market and the health insurance market. We develop an equilibrium model with rich heterogeneities across local markets, workers and firms; and estimate it exploiting variations across states and policy environments before and after the Affordable Care Act. The estimated model closely matches the distribution of insurance and employment status before and after the ACA. With the estimated model, we study the impacts of programs in the form of the newly proposed Medicaid block granting, which allows for state-specific Medicaid eligibility and coverage rules. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:1448&r=ias |
| By: | Geoff Clark, Michael O'Dwyer, Ysanne Chapman and Benjamin Rolfe |
| Abstract: | The Sustainable Development Goal 3 targets aim to ensure that individuals achieve universal health coverage and that the capacity of countries, to identify early warnings, implement risk reduction plans and to respond and manage national and global health risks including emerging infectious diseases outbreaks is strengthened. Funding for the achievement of these outcomes can be erratic and weak healthcare systems do not cope well with the vagaries of fluctuating economies. Universal health coverage is achievable with formulated social health insurance programs that ensure consistent and predictable financial flows. This article deliberates the situation in the Asia Pacific region considering how funding the elimination of infectious diseases (specifically malaria) can facilitate a strengthening of weak health systems, which in turn will build economic potency and health security in the region. |
| Keywords: | universal health coverage, social health insurance, malaria, Asia Pacific, health security |
| URL: | http://d.repec.org/n?u=RePEc:een:appswp:201812&r=ias |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:okl:wpaper:1802&r=ias |
| By: | Robert Fenge; Max Friese |
| Abstract: | This paper compares the decentral organization of unemployment insurance in member states of a state union with the central organization at the upper union’ level. In a model of two countries the labor force and the firm owners can migrate between the states. Labor markets exhibit unemployment due to trade union’s bargaining about the wage rate. In a decentral scenario the states organize independently unemployment insurance and decide about the rate on wages contributed to the insurance budget. Due to open borders they have to take account of migration effects. However, with perfect mobility between the states each government chooses a socially optimal contribution rate such that workers are fully insured against unemployment. In the central scenario the governments overestimate the costs of insurance when bargaining about the contribution rate and observing the common insurance budget of both countries. This leads to a less than socially optimal contribution rate. |
| Keywords: | unemployment insurance policy, state union, centralization, migration externalities |
| JEL: | H77 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_6898&r=ias |
| By: | Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey; Department of Economics, University of Pretoria, Pretoria, South Africa and Montpellier Business School, Montpellier, France); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa); Chien-Chiang Lee (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan); Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, Turkey) |
| Abstract: | It is widely understood that the insurance and banking sectors of every economy perform some functions in driving economic growth. What is not yet well documented is whether their roles are complimentary or substitutive. With the aid of the dynamic panel-GMM estimation technique, this paper evaluates the synergistic effect of both sectors on economic growth in a panel of 11 African countries that are responsible for most of the activities in the continent’s financial sector. The insurance-banking-growth nexus was also examined through panel causality tests. The results show that life insurance market and the banking sector are complimentary and that the non-life insurance market and the banking sector are also complimentary. We find that overall, the relationship between the insurance and banking sectors in Africa is a complimentary one and that their synergistic impact on economic growth is positive. The feedback hypothesis was also confirmed in the relationship between the insurance sector and economic growth and between the banking sector and economic growth. |
| Keywords: | Synergistic effect, Insurance market, Banking sector, Africa, Dynamic GMM, Panel Granger causality |
| JEL: | C33 G21 G22 |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:201818&r=ias |
| By: | Dahl, Gordon B. (University of California, San Diego); Gielen, Anne C. (Erasmus University Rotterdam) |
| 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 non-random 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. |
| Keywords: | peer effects, disability insurance, intergenerational links |
| JEL: | I38 H53 J62 |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11334&r=ias |
| By: | Guber, Raphael (Munich Center for the Economics of Aging); Kocher, Martin (University of Vienna); Winter, Joachim (LMU Munich) |
| Abstract: | Recent research in contract theory on the effects of behavioral biases implicitly assumes that they are stable, in the sense of not being affected by the contracts themselves. In this paper, we provide evidence that this is not necessarily the case. We show that in an insurance context, being insured against losses that may be incurred in a real-effort task changes subjects\' self-confidence. Our novel experimental design allows us to disentangle selection into insurance from the effects of being insured by randomly assigning coverage after subjects revealed whether they want to be insured or not. We find that uninsured subjects are underconfident while those that obtain insurance have well-calibrated beliefs. Our results suggest that there might be another mechanism through which insurance affects behavior than just moral hazard. |
| Keywords: | overconfidence; insurance choice; underplacement; |
| JEL: | D84 D82 C91 |
| Date: | 2018–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:80&r=ias |
| By: | Kyyrä, Tomi; Pesola, Hanna |
| Abstract: | This paper examines the effects of unemployment benefit duration in Finland. To overcome the problem that the maximum duration of benefits is the same for all unemployed we exploit two observations. First, despite the uniform maximum benefit period, potential benefit duration at the beginning of unemployment spells varies across individuals because only those with sufficient work history in the past two years qualify for a new period of benefits whereas others may be entitled to unused benefit days from a previous spell. Second, part of this variation is exogenous due to a reform that reduced the minimum number of employment weeks required for the new benefit period. Using the exogenous part of the variation for identification we estimate that one extra week of benefits increases expected unemployment duration by 0.15 weeks, which corresponds to an elasticity of 0.5. We also find positive effects on the quality of the next job, especially when measured by job stability. |
| Keywords: | unemployment, unemployment benefit, unemployment duration, unemployment insurance, Social security, taxation and inequality, Labour markets and education, J64, J65, |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:87&r=ias |
| By: | David Wiczer (FRB St. Louis); Amanda Michaud (Indiana University) |
| Abstract: | In recent decades, Social Security Disability Insurance (SSDI) claims have risen rapidly. We evaluate the importance of changing macroeconomic conditions in shaping this trend. Our quantitative framework considers that economic conditions interact with individuals' health status in their decisions to apply for SSDI. Crucially, these factors are correlated through the nature of work: multiple sectors differentially expose workers to health and economic risks. Decomposing factors driving SSDI growth in a calibrated model, we find the deteriorating economic conditions and concentration of health risks account for about half of the increase in SSDI claims predicted by the model, about a third overall. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed017:1459&r=ias |
| By: | Nguyen, Cuong; Noy, Ilan |
| Abstract: | We measure the longer-term effect of a major earthquake on the local economy, using night-time light intensity measured from space, and investigate whether insurance claim payments for damaged residential property affected the local recovery process. We focus on the destructive Christchurch earthquake of 2011 as our case study. In this event more than 95% of residential housing units were covered by insurance, but insurance payments were staggered over 5 years, enabling us to identify their local impact. We find that night-time luminosity can capture the process of recovery and describe the recovery’s determinants. We also find that insurance payments contributed significantly to the process of economic recovery after the earthquake, but delayed payments were less affective and cash settlement of claims were more affective in contributing to local recovery than insurance-managed rebuilding. |
| Keywords: | Earthquake, Recovery, Disaster, Insurance, Light, New Zealand, |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:vuw:vuwecf:6955&r=ias |
| By: | Catrina, Ersilia |
| Abstract: | The insurance market can be considered a market where all sorts of anomalies can be encountered or a current acquisition for a situation considered to be certain or relative future, depending on the type of insurance. For the most part, assurance is based on a premise, a hypothesis that is generally based on several factors of influence. Generally, the most important factors in making such a decision are generated by the human-sensitive factor or the economicprotective. Therefore, by joining the insurance market and purchasing any kind of insurance, we must also take into account the risks that arise from these products. Generally, most people perceive these insurance policies in different areas as a future guarantee without considering additional elements that can highlight risk elements that may alter the expected outcome of the acquirer. An important element to mitigate these risks would be the implementation and use of internal control over the supply chain, control that would make a difference between an activity under normal, predictable and legal conditions and a random activity with many elements of risk that can cause major damage to those involved, and to the insurer and the insured. Through this paper, the author aimed to highlight the importance of internal control in insurance companies, as well as the consequences of the lack of internal control within these societies. |
| Keywords: | Policy; insurance; risk; warranty; hypothesis |
| JEL: | G22 M40 M41 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:83664&r=ias |
| By: | Krawczyk, Michal; Trautmann, Stefan (Tilburg University, School of Economics and Management); van de Kuilen, Gijs (Tilburg University, School of Economics and Management) |
| Abstract: | We study behavioral patterns of insurance demand for low-probability large-loss events (catastrophic losses). Individual patterns of belief formation and risk attitude that were suggested in the behavioral decisions literature emerge robustly in the current set of insurance choices. However, social comparison effects are less robust. We do not find any evidence for peer effects (through social-loss aversion or imitation) on insurance take-up. In contrast, we find support for the prediction that people underweight others’ relevant information in their own decision making. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:32c55717-0cd7-46b0-8f2b-6c56bc670a4f&r=ias |
| By: | Linda Schilling (Utrecht University) |
| Abstract: | We analyze optimal strategic delay of bank resolution ('forbearance') and deposit insurance in a setting where, after bad news on the bank, depositors fear for the uninsured part of their deposit and withdraw while the regulator observes withdrawals and needs to decide when to intervene. Under low insurance coverage the optimal intervention policy is to walk away. Optimal deposit insurance coverage is always interior. Fast intervention cannot minimize public losses and be optimal at the same time. The paper sheds light on the differences between the U.S. and the European Monetary Union in terms of their bank resolution policies. |
| Keywords: | Bank resolution, suspension of convertibility, mandatory stay, forbear- ance, bank run, deposit insurance, deposit freeze, recovery rates, global games |
| JEL: | G28 G21 G33 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bfi:wpaper:2018-15&r=ias |
| By: | Lepore, Caterina (Bank of England); Tanaka, Misa (Bank of England); Humphry, David (Bank of England); Sen, Kallol (Bank of England) |
| Abstract: | This paper examines how the interactions between the valuation regime and solvency requirements influence investment behaviour of long-term investors with stable liabilities, such as life insurers. Under limited liability, solvency requirements based on historical cost valuation encourage risk-shifting to the detriment of policyholders, while those based on fair value regime can induce procyclical asset sales. A hybrid valuation regime, intended to address these unfavourable outcomes, does not strictly dominate the other two regimes. But both fair value and hybrid regimes outperform the historical cost regime if the regulators can set the penalty imposed on insurers based on supervisory information about their asset quality, even if this information is imperfect. |
| Keywords: | Valuation; historical cost accounting; mark-to-market; risk-shifting; fire sales; prudential regulation; insurance |
| JEL: | G22 G28 M41 |
| Date: | 2018–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0710&r=ias |