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on Insurance Economics |
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Issue of 2018‒12‒10
twenty papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Elira Kuka (Southern Methodist University) |
| Abstract: | While the Unemployment Insurance (UI) program is one of the largest safety net programs in the U.S., research on its benefits is limited. This paper exploits plausibly exogenous changes in state UI laws to empirically estimate whether UI generosity mitigates any of the previously documented negative health effects of job loss. The results show higher UI generosity increases health insurance coverage and utilization, with stronger effects during periods of high unemployment rates. During such periods, higher UI generosity also leads to improved self-reported health. Finally, I find no effects on risky behaviors nor on health conditions. |
| Keywords: | Unemployment Insurance, health |
| JEL: | I1 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:1808&r=ias |
| By: | Hartung, Benjamin; Jung, Philip; Kuhn, Moritz |
| Abstract: | A key question in labor market research is how the unemployment insurance system affects unemployment rates and labor market dynamics. We revisit this old question studying the German Hartz reforms. On average, lower separation rates explain 76% of declining unemployment after the reform, a fact unexplained by existing research focusing on job finding rates. The reduction in separation rates is heterogeneous, with long-term employed, high-wage workers being most affected. We causally link our empirical findings to the reduction in long-term unemployment benefits using a heterogeneous-agent labor market search model. Absent the reform, unemployment rates would be 50% higher today. |
| Keywords: | endogenous separations; labor market flows; Unemployment insurance |
| JEL: | E24 J63 J64 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13328&r=ias |
| By: | Mark McInerney (University of Connecticut) |
| Abstract: | In this paper, I estimate the impact of substance abuse treatment facilities on the opioid related death rate and other outcomes that may be impacted by the opioid epidemic. Identifying variation comes from the opening and closing of treatment facilities at the county level. I exploit a new source of variation, variation across treatment facilities based on services offered and insurance type accepted. I find significant heterogeneity across treatment facilities. Treatment centers offering Medication Assisted Treatment and accepting Medicaid have a larger negative impact on the opioid related death rate than other treatment facilities. |
| Keywords: | substance use disorder, substance abuse treatment, Opioid epidemic |
| JEL: | I12 I13 I14 R1 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2018-21&r=ias |
| By: | Aubert, M.; Enjolras, G. |
| Abstract: | The purpose of this paper is to examine how crop insurance influences pesticide use, the two decisions being strategic for risk management at the farm scale. Using data from the Farm Accountancy Data Network (FADN), we consider French farms which cultivate field crops and wine-growing, the two main sectors that participate the most to crop insurance and that use intensively pesticides. The paper implements propensity score matching, difference-in-differences models and a combination of these two methods in order to compare populations of insured and non-insured farmers. The analysis is performed between 2008 and 2012 given a strategic change in the crop insurance system in 2010 that strongly incites farmers to purchase crop insurance with private companies. At the same time, pesticide use was progressively discouraged through public policies. Estimations show that while pesticide use decreases for all crops, the purchase of crop insurance policies softens this reduction for field crops and fasten it for wine-growing. These results emphasize a possible substitutability between crop insurance and pesticides as risk management tools. Acknowledgement : |
| Keywords: | Environmental Economics and Policy |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:277242&r=ias |
| By: | Rejesus, R.; Park, S.; Zheng, X.; Goodwin, G. |
| Abstract: | The "Spot Check List" (SCL) approach is an important tool developed to help detect and deter fraud, waste, and abuse in the U.S. crop insurance program. This article carefully examines whether the SCL approach affects producers' claims filing behavior and provides insights with regards to the effectiveness of this program. Using proprietary county-level SCL data and panel data econometric procedures (which controls for both observable and unobservable confounding factors), we find evidence that counties with more than three producers included in the SCL tend to have better actuarial performance (i.e., less claims) after being informed about listing in the SCL. This indicates that the SCL procedure seem to be a promising tool for fraud mitigation in the Federal crop insurance program. Acknowledgement : |
| Keywords: | Risk and Uncertainty |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:277452&r=ias |
| By: | Christian Bührer; Stefan Fetzer; Christian Hagist |
| Abstract: | At the beginning of their career civil servants in Germany can choose between the social health insurance (SHI) system and a private plan combined with a direct reimbursement of the government of up to 70 percent. Most civil servants chose the latter, not only but also because they have to cover all contribution payments in the social system themselves, while normal employees get nearly 50 percent from their employers. The city state of Hamburg decided to change the system by paying a share of the contributions if civil servants choose the social plan. We use a stochastic microsimulation model to analyse which socio-economic types of civil servants could benefit from the Hamburg plan and if this changes the mix of insured persons in the SHI system. Our results show that low income and high morbidity types as well as families have a substantially higher incentive to choose SHI. This reform might thereby increase the adverse selection of high risk cases towards SHI. |
| Keywords: | Health insurance, adverse selection, civil servants, microsimulation |
| JEL: | H55 I18 I13 |
| Date: | 2018–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:whu:wpaper:18-06&r=ias |
| By: | Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University); Muhammad Shahbaz (Montpelier Business School, Montpelier, France) |
| Abstract: | By employing a non-linear autoregressive distributed lag (NARDL) model, this study investigates the effect of monetary policy uncertainty on insurance premium per-capita in Japan. Asides the confirmation of a long-run relationship between monetary policy uncertainty, insurance premium per-capita and real income per-capita, we also find that a positive relationship exists between monetary policy uncertainty and insurance premium per-capita. This shows that when economic policy uncertainty increases (decreases) then insurance premiums increases (decreases) in response. Moreover, we discovered that monetary policy uncertainty impacts insurance premium per-capita in an asymmetric way, such that negative changes have a bigger effect than positive changes on total insurance premium per-capita in Japan. We also found that real income per-capita has a significant and positive effect on insurance premium per-capita, and that the long run elasticity of insurance premium per-capita real income per-capita is smaller than unit. This implies that insurance is a necessity and not a luxury in Japan. |
| Keywords: | Monetary Policy Uncertainty, Insurance Premiums, NARDL |
| JEL: | C32 G22 O16 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:emu:wpaper:15-39.pdf&r=ias |
| By: | Vasilev, Aleksandar |
| Abstract: | The purpose of this paper is to describe the lottery- and insurance-market equilibrium in an economy with non-convex labor supply decision, unobservable effort, and efficiency wages of the no-shirking type a la Shapiro and Stiglitz (1984). The presence of indivisible labor creates a market incompleteness, which requires that an insurance market for (un)employment be put in operation to "complete" the market. |
| Keywords: | indivisible labor,lotteries,unobservable effort,insurance,no-shirking efficiency wages |
| JEL: | E1 J22 J41 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:184667&r=ias |
| By: | Swapnil Singh (Center for Excellence in Finance and Economic Research (CEFER), Bank of Lithuania) |
| Abstract: | Using the March Current Population Survey, I show that over the last two decades, married households in the United States received increasingly more public insurance against labor income risk, whereas the opposite was true for single households. To evaluate the welfare consequences of this trend, I perform a quantitative analysis. As a novel contribution, I expand the standard incomplete markets model à la Aiyagari (1994) to include two groups of households: married and single. The model allows for changes in the marital status of households and accounts for transition dynamics between steady states. I show that the divergent trends in public insurance have a significant detrimental effect on the welfare of both married and single households. |
| Keywords: | Incomplete markets, welfare, consumption inequality, progressive taxation, insurance |
| JEL: | D52 D60 E21 E62 H31 |
| Date: | 2018–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:lie:wpaper:54&r=ias |
| By: | Alexis Louaas (Department of Economics, Ecole Polytechnique - X - École polytechnique - CNRS - Centre National de la Recherche Scientifique); Pierre Picard (X - École polytechnique) |
| Abstract: | Catastrophic risks are often characterized by a low probability and a high severity. Taking these specificities into account, we analyze the intrinsic reasons for which catastrophic risks may be more or less insurable, independently from the market failures frequently observed in practice. On the demand side, we characterize individual preferences under which the willingness to pay for the coverage of large losses remains significant, although their occurrence probability is very small. On the supply side, the correlation between individual losses affects the insurance pricing through the insurers' cost of capital. Analyzing the interaction between demand and supply yields the key determinants of insurability and of a socially optimal risk sharing strategy. |
| Keywords: | Disaster insurance,catastrophic risk,risk aversion,capital costs |
| Date: | 2018–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01924408&r=ias |
| By: | Godwin Olasehinde-Williams (Department of Economics, Eastern Mediterranean University); Mehmet Balcilar (Department of Economics, Eastern Mediterranean University); Muhammad Shahbaz (Montpelier Business School, Montpelier, France) |
| Abstract: | This study applies bootstrap panel Granger causality test of to examine the causal relationship between globalization and insurance market activities in large emerging market economies. Economic, social, political and overall globalization indices are considered separately, and 3 alternative measures of globalization (hybrid, de facto and de jure) are also used in each case for our estimations. The empirical results confirm the following; first, empirical outcomes are sensitive to the choice of globalization measure used. Second, cross-sectional dependence and cross-country heterogeneity exist among large emerging market economies. Third, causality varies across large emerging economies with different conditions, and social globalization has the most widespread effect on insurance market activities. |
| Keywords: | Globalization, Insurance Markets, Bootstrap panel Granger causality, Large Emerging Market Economies |
| JEL: | C23 G22 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:emu:wpaper:15-40.pdf&r=ias |
| By: | Valentin SCARLAT (Faculty of Financial Management, Ecological University of Bucharest) |
| Abstract: | Using financial-banking institutions in money laundering contribute to the undermining of financial institutions, in part and that kind proximal, of the entire financial system. At the same time, the increasing integration of global financial systems and removing the barriers placed in the front of free capitals movement, facilitated ease with which black money can be washed and complicates money tracking circuit (be materialized in their, or as scriptural money). To earn money by fraud has, invariably, a transient nature. They ruin the reputation and it discourages honest investor. Financial institutions involved in money laundering scandal will risk prosecution in court and loss of goodwill on the market. If not controlled, process of money laundering may undermine efforts for existence of a free and competitive market and may affect the development of a healthy economy. [3] Thus, the insurance market as a whole plays a special role in the national system of the money laundering preventing and combating and the increase in the volume of transactions grows the risk degree of money laundering and combating terrorism. |
| Keywords: | preventing and combating money laundering, insurance market, entities, knows your customer, suspicious transactions |
| JEL: | G22 G28 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:eub:wpaper:2018-04&r=ias |
| By: | Douadia Bougherara (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Laurent Piet (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST) |
| Abstract: | A growing number of studies in finance and economics seek to explain insurance choices us- ing the assumptions advanced by behavioral economics. One recent example in agricultural economics is the use of cumulative prospect theory (CPT) to explain farmer choices regarding crop insurance coverage levels (Babcock, 2015). We build upon this framework by deriving willingness to pay (WTP) for insurance programs under alternative assumptions, thus extend- ing the model to incorporate farmer decisions regarding whether or not to purchase insurance. Our contribution is twofold. First, we study the sensitivity of farmer WTP for crop insurance to the inclusion of CPT parameters. We find that loss aversion and probability distortion in- crease WTP for insurance while risk aversion decreases it. Probability distortion in losses plays a particularly important role. Second, we study the impact of yield distribution skewness on farmer WTP assuming CPT preferences. We find that WTP decreases when the distribution of yields moves from negatively- to positively-skewed and that the combined effect of proba- bility weighting in losses and skewness has a large negative impact on farmer WTP for crop insurance. |
| Abstract: | Un nombre croissant d'études en finance et en économie cherchent à expliquer les choix d'assu- rance à partir des hypothèses formulées par l'économie comportementale. Un exemple ré- cent en économie agricole utilise la théorie des perspectives cumulées (ou CPT pour "cu- mulative prospect theory") pour expliquer les choix des agriculteurs en matière de niveau de franchise d'une assurance récolte (Babcock, 2015). Nous étendons cette étude en dérivant le consentement à payer pour le contrat d'assurance proposé sous différentes hypothèses alter- natives, enrichissant ainsi le modèle en y intégrant la décision des agriculteurs d'acheter ou non l'assurance. Notre contribution est double. Premièrement, nous étudions la sensibilité du consentement à payer des agriculteurs vis-à-vis des différents paramètres définissant le cadre théorique CPT. Nous trouvons que l'aversion à la perte et la distorsion des probabilités aug- mentent le consentement à payer alors que l'aversion au risque le fait baisser. En particulier, la distorsion des probabilités dans le domaine des pertes joue un rôle prépondérant. Deuxième- ment, nous étudions l'impact de l'asymétrie de la distribution des rendements sur le consente- ment à payer d'agriculteurs dont les préférences sont supposées être CPT. Nous trouvons que le consentement à payer diminue lorsque l'asymétrie de la distribution passe de négative à pos- itive, et que l'effet combiné de la pondération des probabilités dans le domaine des pertes et de l'asymétrie des rendements fait fortement baisser le consentement à payer des agriculteurs pour l'assurance récolte. |
| Keywords: | crop insurance,cumulative prospect theory,premium subsidy,Skewness,théorie des perspectives cumulées,subvention de la prime d’assurance,assurance récolte |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-01911611&r=ias |
| By: | Katherine Baicker; Amy Finkelstein |
| Abstract: | In 2008, a group of uninsured low-income adults in Oregon was selected by lottery for the chance to apply for Medicaid. Using this randomized design and state administrative data on voter behavior, we analyze how a Medicaid expansion affected voter turnout and registration. We find that Medicaid increased voter turnout in the November 2008 Presidential election by about 7 percent overall, with the effects concentrated in men (18 percent increase) and in residents of democratic counties (10 percent increase); there is suggestive evidence that the increase in voting reflected new voter registrations, rather than increased turnout among pre-existing registrants. There is no evidence of an increase in voter turnout in subsequent elections, up to and including the November 2010 midterm election. |
| JEL: | I13 I28 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25244&r=ias |
| By: | Aina, I.; Ayinde, O.E.; Thiam, D.; Miranda, M. |
| Abstract: | In this paper, we examine factors influencing adoption of the index-based livestock insurance (IBLI) in Kwara State, Nigeria. We apply open-ended contingent valuation technique to determine the amount farmers are willing to pay for the IBLI offering coverage for livestock valued at N500,000 (Nigerian Naira). We carried out this study on household heads who took the traditional insurance in previous years. We also discuss important issues ranging from the IBLI premium cost to the effect of religion, education and gender on adoption of the insurance product. Our results create an initial framework for the acceptance of the IBLI since the product is not presently existing in Nigeria. Acknowledgement : Special thanks to the Africa Regional International Student/Staff Exchange (ARISE) Programme at the University of Cape Town, for the mobility fund to develop this paper at the University of Cape Town, South Africa. |
| Keywords: | Livestock Production/Industries |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:277383&r=ias |
| By: | Gulesci, Selim |
| Abstract: | A widely-held view is that small firms in developing countries are prevented from making profitable investments by lack of access to credit and insurance markets. One solution is to provide repayment flexibility in credit contracts. Repayment flexibility eases both the credit constraint, as it allows for increased spending during the startup phase, and offers insurance, in case of fluctuations in income. In a field experiment among microcredit borrowers in Bangladesh, we randomly assign the option to delay up to 2 monthly repayments at any point during a 12-month loan cycle. The flexible contract leads to substantial (0.2 standard deviation) improvements in business outcomes and socio-economic status, combined with lower default rates. The results are driven by an increase in entrepreneurial risk taking, implying that the primary mechanism is insurance provision. Repayment flexibility also attracts less risk-averse borrowers. Our findings suggest that lack of insurance is an important constraint for small firms but that a simple financial product that increases repayment flexibility can be an effective tool for enabling enterprise growth. |
| Keywords: | credit; entrepreneurship; Insurance; Microfinance; Repayment flexibility |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13329&r=ias |
| By: | Musgrave, Ralph S. |
| Abstract: | Most of the money in circulation is created by commercial banks, and it is precisely that form of money creation that explains most bank failures. In contrast, full reserve banking is a system under which that form of money is banned: all money is created by the central bank. There is a very simple reason for such a ban which most if not all advocates of full reserve seem to have missed, which is as follows. Under the existing bank system, those who deposit money at banks with a view to their bank lending on their money so as to earn interest are into commerce, in just the same way as where they deposit money with a stock-broker, mutual fund, private pension scheme or similar with a view to their money being loaned on or invested. And it is a widely accepted principle that taxpayers should not rescue commercial ventures which fail. Yet taxpayer backed deposit insurance is provided for those bank depositors. Thus if the latter principle were adhered to consistently, then there would be no deposit insurance for “interest earning” deposits, while of course totally safe non-interest earning deposits would be available for those who want them. And that “two types of deposit” system is what full reserve has always consisted of. The above point about commercial and non-commercial depositors is similar to, but not quite the same as the more conventional argument for full reserve, which is along the lines that governments cannot allow a series of major bank failures, which inevitably means banks are featherbedded or subsidised (a non-commercial activity) thus some way must be found of removing that subsidy, and one way is full reserve. The first 1,300 or so words below briefly introduce full reserve. The basic argument put in this paper then starts under the heading “Taxpayers should not back commerce.” |
| Keywords: | full reserve banking; sovereign money; vollgeld; deposit insurance |
| JEL: | G01 G21 G28 |
| Date: | 2018–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90041&r=ias |
| By: | Maria D. Fitzpatrick |
| Abstract: | For many people, working after beginning retirement benefit collection is a way to enhance financial security by increasing income. Existing research has shown that retirees are sensitive to the Social Security earnings test, which restricts the amount of earnings some beneficiaries can receive. However, little is known about the effects of other types of policies on post-retirement employment. Instead of restricting earnings, many public pension plans restrict the number of hours beneficiaries can work. I use return-to-work rules limiting the number of hours of employment in a state’s public pension plan and administrative data on employment and retirement to determine the rules’ effects on retirement decisions and post-retirement labor supply. I find that the increases in the maximum number of hours of post-retirement employment lead to no change in retirement benefit collection and to increases in part-time work among retirees. As such, these policies appear to be binding on the labor supply decisions of some employees. Policymakers should take this into account when designing policies aimed at extending work-lives or improving the health of pension systems. |
| JEL: | H55 J26 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25299&r=ias |
| By: | Francesca Carapella, Cyril Monnet |
| Abstract: | We develop a parsimonious model to study the equilibrium structure of over-the- counter securities markets. We show that regulations aimed at reducing counterparty risk and improving liquidity can be inecient. Such regulations have a direct posi- tive e ect on entry in those markets, thus fostering competition and lowering spreads. Greater competition, however, has an indirect negative e ect on market making prof- itability, this e ect being stronger on more ecient intermediaries. Thus, general equi- librium e ects result in reduced incentives of all intermediaries to invest in ecient technologies and can cause a social welfare loss. The equilibrium outcome is consis- tent with some empirical ndings on the e ects of post-crisis regulations and with the observed resistance by some market participants to those regulations. |
| Keywords: | Liquidity, dealers, insurance, central counterparties |
| JEL: | G11 G23 G28 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1812&r=ias |
| By: | Riphahn, Regina T. (University of Erlangen-Nuremberg); Schrader, Rebecca (University of Erlangen-Nuremberg) |
| Abstract: | We investigate whether a cut in unemployment benefit payout periods affected older workers' labor market transitions. We apply rich administrative data and exploit a difference-in-differences approach. We compare the reference group of 40-44 year olds with constant benefit payout periods to older treatment groups with reduced payout durations. For the latter job exit rates declined, job finding rates increased, the propensity to remain employed increased, and the propensity to remain unemployed declined after the reform. These patterns suggest that the reform of unemployment benefits may be one of the reasons behind the recent incredible rise in old age employment in Germany. |
| Keywords: | labor force participation, employment, unemployment insurance, retirement |
| JEL: | J14 J26 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11931&r=ias |