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on Insurance Economics |
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Issue of 2019‒05‒20
fifteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Pietro Tebaldi; Alexander Torgovitsky; Hanbin Yang |
| Abstract: | We estimate the demand for health insurance in the California Affordable Care Act marketplace (Covered California) without using parametric assumptions about the unobserved components of utility. To do this, we develop a computational method for constructing sharp identified sets in a nonparametric discrete choice model. The model allows for endogeneity in prices (premiums) and for the use of instrumental variables to address this endogeneity. We use the method to estimate bounds on the effects of changing premium subsidies on coverage choices, consumer surplus, and government spending. We find that a $10 decrease in monthly premium subsidies would cause between a 1.6% and 7.0% decline in the proportion of low-income adults with coverage. The reduction in total annual consumer surplus would be between $63 and $78 million, while the savings in yearly subsidy outlays would be between $238 and $604 million. Comparable logit models yield price sensitivity estimates towards the lower end of the bounds. |
| JEL: | C14 C3 C5 I13 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25827&r=all |
| By: | Jack Gettens; Alexis Henry |
| Abstract: | This study, which is described fully in Gettens and Henry (2019), is based on interviews of 35 low-income DI beneficiaries living in the Worcester, Massachusetts area. We found that study participants used their formal income, mainly DI payments, to support most of their consumption and thus, consumption levels for most were low. |
| Keywords: | Social Security Disability Insurance, low-income populations, financial management |
| JEL: | I J |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:91b122149f084708a520f9d4612b4c7d&r=all |
| By: | Schreiner, Ragnhild C. (Dept. of Economics, University of Oslo) |
| Abstract: | This paper examines the effect of being granted temporary disability insurance (TDI), as opposed to a non-health related benefit, on later labor market outcomes of youths who are seeking temporary income support from the state. In Norway, there has been a development over time towards a more lenient screening to TDI, and this development has been more pronounced in some municipalities than in others. Using local screening leniency as an instrument for TDI receipt, I find that being granted TDI benefits significantly reduces later labor market attachment of youths whose benefit receipt would differ according to their municipality of residence, and the year of entry to the benefit system. |
| Keywords: | Social insurance; disability screening; youth unemployment; program evaluation |
| JEL: | C21 C26 H55 I18 |
| Date: | 2019–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2019_005&r=all |
| By: | Katona, Katalin (Tilburg University, School of Economics and Management) |
| Abstract: | This dissertation contributes to a better understanding of the health insurance markets in managed competition setting by discussing potential market failures and policy interventions. After the introduction of Chapter 1, Chapter 2 measures price elasticity in the Netherlands before and after the health insurance reforms in 2006. Chapter 3 provides evidence for adverse selection in the Dutch health insurance market due to voluntary deductibles. Chapter 4 illustrates the welfare effects of increased degree of substitution in the health insurance market using a theoretical model. Chapter 5 explores the incentives for and welfare effects of vertical integration and exclusive behavior between health insurers and hospitals in a theoretical model. Finally, Chapter 6 studies the effect of financing the healthcare expenditures through insurance (rather than directly out of packet) on the hospital merger analyses. The empirical studies (Chapter 2 and 3) use data from the Netherlands. Nonetheless, the main conclusions and the theoretical models (Chapter 4, 5 and 6) can also be applied to other health care systems based on the principles of managed competition. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:2c2dd13d-91a8-4706-b705-954e472f4832&r=all |
| By: | Andrea Wysocki; Valerie Cheh |
| Abstract: | This study examined the characteristics of community-admitted Medicare home health care patients to better understand the underlying reasons for their increased numbers and found many important differences between patients based on both their source of admission and length of their home health use. |
| Keywords: | Medicare, Home health, Long-term services and supports |
| JEL: | I |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:7021abd93fea4e1b9c02118af257700a&r=all |
| By: | Liu, Yong; Ker, Alan P. |
| Abstract: | The Federal Crop Insurance Program -- operated by the United States Department of Agriculture's Risk Management Agency (RMA) -- offers various types of insurance, covers a multitude of crops, carries significant liability, and is the cornerstone of domestic farm policy. Currently, RMA uses county yield data from the 1950s onwards to set guarantees and estimate premium rates for their area yield and revenue insurance products but trims yield data prior to 1991 in rating their newer shallow loss products. The past 70 years reflect very significant innovations in both seed and farm management technologies; innovations that have likely moved mass all around the support of the yield distribution. Although the RMA rating methodology corrects for time-varying movements in the first two moments, it is unclear whether using the entire yield series remains appropriate. We use distributional tests and an out-of-sample retain-cede rating game to answer if RMA should or should not historically trim yields in estimating their premium rates. Despite small sample sizes and the need to estimate tail probabilities, the historical data appears to be sufficiently different such that trimming is justified. While we caution against extrapolation of our results, they do give cause for consideration in other empirical analyses using historical yield data. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2019–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uguiwp:288449&r=all |
| By: | De Nardi, Mariacristina; Fella, Giulio; Knoef, Marike; Van Ooijen, Raun |
| Abstract: | We document new facts on the distributions of male wages, male earnings, and household earnings and income (before and after taxes) in the Netherlands and the United States. We find that, in both countries, wages display rich dynamics, including substantial asymmetries and nonlinearities by age and previous earnings levels. Individual-level male wage and earnings risk is relatively high for younger and older people, and for those in the lower and upper parts of the income distribution. In the Netherlands, the behavior of hours and family labor supply have noticeable effects on earnings persistence and on the skewness and kurtosis of wage changes, but government transfers are a major source of insurance. Instead, the role of family insurance is much larger in the U.S. and also affects the standard deviation of wage changes, in addition to its skewness and kurtosis, and wage persistence. Family and government insurance reduce, but do not eliminate these non-linearities in household disposable income by age and previous earnings in both countries. |
| Keywords: | earnings risk; family insurance; government insurance; Wage risk |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13720&r=all |
| By: | Mariacristina De Nardi; Giulio Fella; Marike G. Knoef; Gonzalo Paz-Pardo; Raun Van Ooijen |
| Abstract: | We document new facts on the distributions of male wages, male earnings, and household earnings and income (before and after taxes) in the Netherlands and the United States. We find that, in both countries, wages display rich dynamics, including substantial asymmetries and nonlinearities by age and previous earnings levels. Individual-level male wage and earnings risk is relatively high for younger and older people, and for those in the lower and upper parts of the income distribution. In the Netherlands, the behavior of hours and family labor supply have noticeable effects on earnings persistence and on the skewness and kurtosis of wage changes, but government transfers are a major source of insurance. Instead, the role of family insurance is much larger in the U.S. and also affects the standard deviation of wage changes, in addition to its skewness and kurtosis, and wage persistence. Family and government insurance reduce, but do not eliminate these non-linearities in household disposable income by age and previous earnings in both countries. |
| JEL: | H31 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25832&r=all |
| By: | Cornel Coca Constantinescu (Financial Supervisory Authority); Ion Stanciu (Institute of Financial Studies); Iulian Panait (Financial Supervisory Authority and Institute of Financial Studies) |
| Abstract: | The development of telematic systems, as well as the need to differentiate the motor insurance market, led to the emergence of new clauses in motor insurance contracts. Thus, vehicle insurance contracts with self-check (and telematic) insurance policies are in the recent focus of insurance companies for motor insurance. With the help of a telematics device installed on the vehicle and a mobile application the driving mode of the driver is permanently assessed;the rating is calculated according andthe discount for the insurance priceis setaccordingly. These types of auto insurance contract terms can provide, on average, 25% savings for carefullydrivers.Our paperpresents, the recent developments in telematics insurance in Europe and around the world and the Romanian drivers propension to accept the monitoring of their driving behavior. We then present the economic, financial and socio-ecological advantages versusdisadvantages revealed by specialized literature for both policyholders and insurers. In this context, we will prefigure the future of telematics insurance in Europe.In our empirical study we estimate the financial impact of telematics insurance in Romania on gross written prices and gross paid indemnities. Finally, we estimate the socio-economic impact of these telematics insurance on the decrease in the number of kilometers,fuel consumption, number of accidents and casualties, and implicitly, on the reduction of the cost of the compensation. For this impact study we used the scenario technique (pessimistic, moderate and optimistic) in relation to the baseline scenario, respectively, the estimate of the natural evolution of the insurance market in the absence of telematics. |
| Keywords: | auto telematics insurance, driving behavior rating, financial impact of telematics insurance, socio-economic impact of telematics insurance, scenario technique. |
| JEL: | C53 D03 D53 G22 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fst:wpaper:0010&r=all |
| By: | Fels, Markus |
| Abstract: | Some consumption opportunities are both indivisible and only valuable in particular tates of nature. The existence of such state-dependent indivisible consumption opportunities influences a person's risk attitudes. In general, people are not risk averse anymore even if utility from divisible consumption is concave. I propose a definition of insurance in the context of state-dependent preferences and investigate the different motives underlying insurance demand. The same reasons that rule out risk aversion turn out to be the basis of a desire to insure. This calls into question the standard approach that bases insurance demand on risk aversion with important implications for policy and research. |
| Keywords: | risk preferences,indivisible consumption,insurance,gambling |
| JEL: | D01 D81 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:rwirep:805&r=all |
| By: | Renaud Bourlès (Aix-Marseille School of Economics (CNRS / AMU / EHESS) (AMSE)); Yann Bramoullé (Aix-Marseille School of Economics (CNRS / AMU / EHESS)); Eduardo Perez (Département d'économie) |
| Abstract: | We provide the first analysis of the risk-sharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk-sharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a first-order impact on risk and generates specific patterns of consumption smoothing. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/cpem82ltk8fgprl50i20pgomf&r=all |
| By: | Renaud Bourlès (Aix-Marseille School of Economics (CNRS / AMU / EHESS) (AMSE)); Yann Bramoullé (Aix-Marseille School of Economics (CNRS / AMU / EHESS)); Eduardo Perez (Département d'économie) |
| Abstract: | We provide the first analysis of the risk-sharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk-sharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a first-order impact on risk and generates specific patterns of consumption smoothing. |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/cpem82ltk8fgprl50i20pgomf&r=all |
| By: | Stephanie Lluis (Department of Economics, University of Waterloo); Brian McCall (University of Michigan) |
| Abstract: | In this paper, we study the impact of increased generosity in the unemployment insurance system on labour supply adjustments of a spouse following the job loss of his/her partner. We exploit the longitudinal household format of the Canadian Labour Force Survey following labour force transitions of each spouse over time and estimate spousal labour supply responses arising from an added worker effect, whereby spousal labour supply increases following the partner’s job loss. We study whether the additional weeks of benefits offered by the Extended Weeks (EW) pilot, an initiative of the Employment Insurance program implemented in a subset of regions, had a differential impact on spousal labour supply. We use a difference-in-difference (DiD) approach to identify (separately from the added worker effect) a crowding-out effect of EI on the spousal labour supply resulting from the greater generosity of the added benefits weeks. Our fixed-effect estimation results show a statistically significant and substantial added worker effect for married women. Our DiD results show evidence of EI crowding-out the labour supply of wives whose spouse’s job loss qualifies for EI benefits. The crowding-out effect of EI diminishes about 55% of the added worker effect. |
| JEL: | J62 J65 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:1810&r=all |
| By: | Tatsuki Inoue |
| Abstract: | This study examines the role of pawnshops as a risk-coping strategy in Japan in the prewar period when poor people were highly vulnerable. Using data on pawnshop loans in more than 250 municipalities and the 1918--1920 influenza pandemic as a natural experiment, we find that the total loan amount increased because of the pandemic shock. Our results suggest that those who regularly relied on pawnshops borrowed from them more money than usual to cope with the adverse health shock, whereas others did not take out pawnshop loans. In addition, further analyses reveal that loans from pawnshops prevented an increase in the unemployment rate due to the pandemic. Pawnshops thus served as an informal social insurance mechanism in early twentieth-century Japan. |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1905.04419&r=all |
| By: | Mercedes Ayuso (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.); Rodrigo Sánchez-Reyes (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.); Miguel Santolino (Department of Econometrics, Riskcenter-IREA, University of Barcelona Av. Diagonal 690, 08034 Barcelona.) |
| Abstract: | This article seeks to demonstrate differences in the severity of traffic accidents among two subgroups of older drivers – young-older (65–75) and old-older (75+). Spain, in common with other countries, has recorded an increase in its number of older drivers due to an increase in this population cohort, an increase that is set to become significant over coming years. Moreover, older drivers are now living and driving for longer periods given increasing levels of life expectancy for the elderly. The greater frequency and longevity of older drivers suggests the need to introduce a possible segmentation within this group at risk, in line with practices for drivers below the age of 65 (thus eliminating the generic interval of 65 and over as applied today in road safety data and in the automobile insurance sector). Here, we draw on data for 2016 provided by the Dirección General de Tráfico de España (Spanish Traffic Authority) and apply generalized additive and generalized linear models to demonstrate that accident severity and the expected costs of accidents increase when the driver is over the age of 75. We identify the factors related to the accident, vehicle and driver that have a significant impact on the probability of the accident being slight, serious or fatal for different age groups. Our results have obvious implications for regulators responsible for road safety policies – most specifically as they consider the need to introduce an upper age limit for driving – and for the automobile insurance industry, which to date has not examined the impact that the longevity of drivers is likely to have on their balance sheets. |
| Keywords: | Older drivers, groups at risk, bodily injuries, accident costs. JEL classification:J11, J14, I10, C5. |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201908&r=all |