nep-ias New Economics Papers
on Insurance Economics
Issue of 2018‒12‒17
eight papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Performance of Farm Level Vs Area Level Crop Insurance By Awondo, S.; Datta, G.
  2. The effect of reinsuring a deductible on pharmaceutical spending: A Dutch case study on low-income people By Marielle Non; Rudy Douven; Richard van Kleef; Onno van der Galiën
  3. Job Displacement, Family Dynamics and Spousal Labor Supply By Martin Halla; Julia Schmieder; Andrea Weber
  4. The Effects of Capping Co-Insurance Payments By Westerhout, Ed; Folmer, Kees
  5. Selection and Treatment Effects of Health Insurance Subsidies in the Long Run: Evidence from a Randomized Control Trial in Ghana By Patrick Asuming; Hyuncheol Bryant Kim; Armand Sim
  6. Wages and the Value of Nonemployment By Simon Jäger; Benjamin Schoefer; Samuel Young; Josef Zweimüller
  7. Subsidizing Labor Hoarding in Recessions: The Employment & Welfare Effects of Short Time Work By Giulia Giupponi; Camille Landais
  8. Improving the Czech health care system By Falilou Fall; Daniela Glocker

  1. By: Awondo, S.; Datta, G.
    Abstract: This study investigated the performance of Actual Production History (APH), a farm level crop insurance plan, vis- a-vis Area Yield Production (AYP), an area level crop insurance, as a farm risk management tool. We estimated actuarially fair premiums and trigger probabilities under both plans using a two-step hierarchical Bayes small area estimator. Certainty equivalent revenues based on a risk averse utility function were derived under three insurance choice scenario (APH, AYP, no insurance) with and without actual Federal subsidies. Finally, we derived the performance of each alternative plan with regards to the other following a pair-wise comparison of certainty equivalent revenues. Results suggest that unobserved factors other than basis risk and farmers risk preference drive preferences for crop insurance contracts. Acknowledgement :
    Keywords: Risk and Uncertainty
    Date: 2018–07
  2. By: Marielle Non (CPB Netherlands Bureau for Economic Policy Analysis); Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Richard van Kleef (EUR); Onno van der Galiën (Achmea)
    Abstract: The basic health insurance in the Netherlands includes a mandatory deductible of currently 385 euros per adult per year. Several municipalities offer a group contract for low-income people in which the deductible is reinsured, meaning that out-of-pocket spending under the deductible is covered by supplementary insurance. This study examines to what extent such reinsurance leads to higher pharmaceutical spending. We use a unique dataset from a Dutch health insurer with anonymized individual insurance claims for the period 2014-2017. We run a difference-in-difference regression to estimate the effect of reinsurance on pharmaceutical spending. The treatment group consists of enrollees from three municipalities that implemented reinsurance on January 1st 2017. The control group includes enrollees from three municipalities that didn’t implement reinsurance. We find that the introduction of reinsurance led to a statistically significant increase in pharmaceutical spending of 16% in the first quarter of 2017 and 7% in the second quarter. For the second half of 2017 the effect is small and not statistically significant. Conditional on people with low expected spending we find a statistically significant increase in pharmaceutical spending in all four quarters of 2017 varying from 22% to 30% per quarter.
    JEL: I12 I13 C23 D12
    Date: 2018–11
  3. By: Martin Halla; Julia Schmieder; Andrea Weber
    Abstract: We study the effectiveness of intra-household insurance among married couples when the husband loses his job due to a mass layoff or plant closure. Empirical results based on Austrian administrative data show that husbands suffer persistent employment and earnings losses, while wives’ labor supply increases moderately due to extensive margin responses. Wives’ earnings gains recover only a tiny fraction of the household income loss and, in the short-term, public transfers and taxes are a more important form of insurance. We show that the presence of children in the household is a crucial determinant of the wives’ labor supply response.
    Keywords: Firm Events, Household Labor Supply, Intra-household Insurance, Added Worker Effect.
    JEL: D19 J22 J65
    Date: 2018–11
  4. By: Westerhout, Ed (Tilburg University, Center For Economic Research); Folmer, Kees
    Abstract: It is common to limit the cost sharing in health insurance schemes by a cap on co-insurance payments. This paper derives the economic and welfare effects of such a cap, adopting a model of which two features are crucial. First, health care demand is price-elastic. Second, demand is less elastic the worser the consumer’s health status. The paper derives that a cap induces optimizing health insurers to raise the co-insurance rate. This raises welfare in the aggregate, but part of the consumers do not share in this welfare gain. In particular, those with health spending close to the level at which co-insurance payments reach their maximum level suffer large welfare losses. We adopt a 3- state model to derive our results and a continuous-state model for a numerical illustration.
    Keywords: coinsurance; health insurance; cap on coinsurance payments; moral hazard
    JEL: D60 H21 I18
    Date: 2018
  5. By: Patrick Asuming; Hyuncheol Bryant Kim; Armand Sim
    Abstract: We study long-run selection and treatment effects of a health insurance subsidy in Ghana, where mandates are not enforceable. We randomly provide different levels of subsidy (1/3, 2/3, and full), with follow-up surveys seven months and three years after the initial intervention. We find that a one-time subsidy promotes and sustains insurance enrollment for all treatment groups, but long-run health care service utilization increases only for the partial subsidy (1/3 and 2/3) groups. We find evidence that selection explains this pattern: those who were enrolled due to the subsidy, especially the partial subsidy, are more ill and have greater health care utilization.
    Date: 2018–11
  6. By: Simon Jäger; Benjamin Schoefer; Samuel Young; Josef Zweimüller
    Abstract: Nonemployment is often posited as a worker’s outside option in wage setting models such as bargaining and wage posting. The value of this state is therefore a fundamental determinant of wages and, in turn, labor supply and job creation. We measure the effect of changes in the value of nonemployment on wages in existing jobs and among job switchers. Our quasi-experimental variation in nonemployment values arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit levels: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than 0.03. In contrast, a calibrated Nash bargaining model predicts a sensitivity of 0.39 – more than ten times larger. The empirical insensitivity holds even among workers with a priori low bargaining power, with low labor force attachment, with high predicted unemployment duration, among job switchers and recently unemployed workers, in areas of high unemployment, in firms with flexible pay policies, and when considering firm-level bargaining. The insensitivity of wages to the nonemployment value we document presents a puzzle to widely used wage setting protocols, and implies that nonemployment may not constitute workers’ relevant threat point. Our evidence supports wage-setting mechanisms that insulate wages from the value of nonemployment.
    JEL: J31 J60 J65
    Date: 2018
  7. By: Giulia Giupponi; Camille Landais
    Abstract: The Great Recession has seen a revival of interest in policies encouraging labor hoarding by firms. Short time work (STW) policies, which consist in offering subsidies for hours reductions to workers in firms experiencing temporary shocks, are the most emblematic of these policies, and have been used aggressively during the recession. Yet, very little is known about their employment and welfare consequences. This paper leverages unique administrative social security data from Italy and quasi-experimental variation in STW policy rules to offer compelling evidence of the effects of STW on firms' and workers' outcomes, and on reallocation in the labor market. Our results show large and significant negative effects of STW treatment on hours, but large and positive effects on headcount employment. Results also show that employment effects disappear when the program stops, and that STW offers no long term insurance to workers. Finally, we identify the presence of significant negative reallocation effects of STW on employment growth of untreated firms in the same local labor market. We develop a simple conceptual framework to rationalize this empirical evidence, from which we derive a general formula for the optimal STW subsidy that clarifies the welfare trade-offs of STW policies. Calibrating the model to our empirical evidence, we conduct counterfactual policy analysis and show that STW stabilized employment during the Great Recession in Italy, and brought (small) positive welfare gains.
    Keywords: short-time work, employment, reallocation, social insurance, optimal policy
    JEL: H20 J20 J65
    Date: 2018–12
  8. By: Falilou Fall (OECD); Daniela Glocker (OECD)
    Abstract: The Czech health care system is doing well in terms of health outcomes compared to other Central East European economies that inherited similar health systems after the transition and has been converging to OECD averages. However, benchmarking the Czech health system to countries with comparable institutional setting points to potential for efficiency gains. This paper assesses the performance and emerging key challenges of the Czech health system, and provides recommendations to adapt the system to remain effective and financially sustainable in the context of an ageing society. Further, the contribution of various disincentives in the system on the supply and the demand side of health care are discussed. This Working Paper relates to the 2018 OECD Economic Survey of Czech Republic. ( y-czech-republic.htm).
    Keywords: ageing, Czech Republic, fee-for-services, generics, health care system, health disparities, health insurance, health policy, health practitioners, healthcare coordination, hospital, pharmaceutical expenditures, prevention, primary healthcare
    JEL: I11 I12 I13 I15 I18
    Date: 2018–12–13

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