nep-ias New Economics Papers
on Insurance Economics
Issue of 2019‒07‒08
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Delayed Collection of Unemployment Insurance in Recessions By Xie, Zoe
  2. Fair long-term care insurance By Marie-Louise Leroux; Pierre Pestieau; Grégory Ponthiere
  3. Agrarian distress in India: Possible solutions By Barendra Kumar Bhoi; C.L. Dadhich
  4. Does Mandating Social Insurance Affect Entrepreneurial Activity? By Benzarti, Youssef; Harju, Jarkko; Matikka, Tuomas
  5. More hospital choices, more C-sections: Evidence from Chile By Ramiro de Elejalde; Eugenio Giolito
  6. The introduction of social pensions and elderly mortality: Evidence 1870-1939 By Jäger, Philipp
  7. Deposit Insurance and Banks’ Deposit Rates: Evidence from the 2009 EU Policy By Matteo Gatti; Tommaso Oliviero
  8. Assessing the size of the risks posed by life insurers' nontraditional liabilities By Nathan Foley-Fisher; Borghan N. Narajabad
  9. Essays on public economics By Paukkeri, Tuuli
  10. Quelle gouvernance pour l'assurance chômage ? By Bruno Coquet
  11. Firm-level employment, labour market reforms, and bank distress By Setzer, Ralph; Stieglitz, Moritz

  1. By: Xie, Zoe (Federal Reserve Bank of Atlanta)
    Abstract: Using variations in unemployment insurance policies over time and across U.S. states, this paper provides evidence that allowing unemployed workers to delay the collection of benefits increases their job-finding rate. In a model with discrete job take-up decisions, benefit entitlement, wage-indexed benefits, and heterogeneous job types, I demonstrate that the policy can increase an unemployed worker's willingness to work, even though more benefits in general reduce the relative value of employment. In a calibrated quantitative model, I find that allowing delayed benefit collection increases the overall job finding rates and may lower the unemployment rate both in a steady state stationary economy and over a transition path during 2008–12.
    Keywords: health; frailty index; life cycle profiles
    JEL: E24 J65
    Date: 2019–06–01
  2. By: Marie-Louise Leroux; Pierre Pestieau; Grégory Ponthiere
    Abstract: The study of optimal long-term care (LTC) social insurance is generally carried out under the utilitarian social criterion, which penalizes individuals who have a lower capacity to convert resources into well-being, such as dependent elderly individuals or prematurely dead individuals. This paper revisits the design of optimal LTC insurance while adopting the ex post egalitarian social criterion, which gives priority to the worst-off in realized terms (i.e. once the state of nature has been revealed). Using a lifecycle model with risk about the duration of life and risk about old-age dependence, it is shown that the optimal LTC social insurance is quite sensitive to the postulated social criterion. The optimal second-best social insurance under the ex post egalitarian criterion involves, in comparison to utilitarianism, higher LTC benefits, lower pension benefits, a higher tax rate on savings, as well as a lower tax rate on labor earnings.
    Keywords: long-term care, social insurance, fairness, mortality, compensation, egalitarianism
    JEL: J14 I31 H55
    Date: 2019
  3. By: Barendra Kumar Bhoi (Indira Gandhi Institute of Development Research); C.L. Dadhich (Indian Society of Agricultural Economics)
    Abstract: Agrarian distress in India, built-up over time, has further deteriorated recently. At the height of the farm output, Indian farmers are a disappointed lot. Despite spectacular rise in agricultural production, they continue to languish in poverty. The underlying reasons for agrarian distress in India are: a) unviable agriculture; b) ineffective Minimum Support Prices (MSP) system; c) adverse terms of trade; d) rural indebtedness; and e) inefficient value chain in agriculture. There is a need to provide medium term solutions to the problem so that sub-optimal solution like loan waiver can be avoided. Among available solutions, government procurement operation covering all major crops may not be feasible, while price-hedging mechanism through derivative instruments like forward/future trading in farm products is yet to be popular among farmers. There is a great potential to protect farmers from distress sale through a composite insurance scheme, which can cover risks arising out of both crop failure and market failure. The value chain of agricultural products needs to be completely revamped to integrate farmers directly to the ultimate consumers. Long-term solution of the agrarian distress lies in improving farm productivity by a series of measures like mass irrigation programme through inter-linking of rivers, diversification of agriculture, smart farming by using latest technology. A scheme of exit route for distress farmers may go a long way in alleviating the situation.
    Keywords: Agrarian distress, crop insurance, minimum support price, inefficient value chain, smart farming, farm productivity
    JEL: Q10 I13 H57 Q13 Q55 R14
    Date: 2019–06
  4. By: Benzarti, Youssef; Harju, Jarkko; Matikka, Tuomas
    Abstract: This paper estimates the effect of relaxing the social insurance mandate on entrepreneurial activity using rich administrative data from Finland. We find that relaxing the social insurance mandate leads entrepreneurs to reduce their contributions by 16%, which they channel instead into their firms. While young firms use the saved cash to increase their sales by 11% and labor costs by 6%, older firms use it to improve their net lending position by purchasing stocks. Our results imply that the impact of the social insurance mandate on business activity is heterogeneous and depends on the age of the firm.
    Keywords: social insurance, entrepreneurs, economic activity, eläkevakuutusmaksut, yrittäjät, yritysten kehitys, Social security, taxation and inequality, Sosiaaliturva, verotus ja tulonjako, H25, H32, H55,
    Date: 2019
  5. By: Ramiro de Elejalde; Eugenio Giolito
    Abstract: In this paper, we study the effect on cesarean rates of a policy change in Chile that decreased the cost of delivery at private hospitals for women with public health insurance. Using a difference-indifferences (DID) approach based on the eligibility conditions for this benefit, we find that in the first three years after the policy took effect, deliveries in private hospitals increased by 8.7 percentage points, while the probability of a C-section being performed increased by 4.6 percentage points, with negative impacts on average newborn weight and size at birth. We show that the probability of an early term birth in hospitals participating in the program is an increasing function of expected hospital demand at the time of the full-term due date. This suggests that in the absence of price incentives, hospitals use C-sections to smooth out demand over time to optimize the use of their resources.
    Keywords: Health care, provider incentives, labor and delivery.
    JEL: I11 I13 I18
    Date: 2019–06–21
  6. By: Jäger, Philipp
    Abstract: The strong association between income and mortality raises the question whether more generous social security systems could improve poor people's health outcomes. Thus, in this paper, I analyze whether a major social security innovation, the introduction of social pensions targeted at poor elderly people in the late 19th-early 20th century, has reduced mortality rates of senior citizens. Therefore, I use a cross-country dataset spanning from 1870 to 1939 consisting of 13 countries of which 9 eventually implemented social pensions before World War II. Applying a difference-in-difference-in-difference as well as a regression discontinuity design, I find no evidence for a decline in elderly mortality due to the introduction of social pensions. Based on aggregate census data, I argue that social pensions have reduced elderly labor supply. The reduction is much smaller than social pension recipiency rates, though. These findings suggest that social pensions have raised elderly incomes which, however, did not translate into lower mortality.
    Keywords: pension,social security,elderly mortality
    JEL: H55 I18
    Date: 2019
  7. By: Matteo Gatti (European University Institute); Tommaso Oliviero (Università di Napoli Federico II and CSEF)
    Abstract: In early 2009 the EU increased the minimum deposit insurance limit from €20,000 to €100,000 per bank account. Italy was the only country with a limit already set to €103,291 from 1994. To evaluate the impact of the new directive we run a diff-in-diff analysis and compare the bank-size weighted average deposit interest rates of the Eurozone countries with the Italian ones. We find that the increase of deposit insurance leads to a decrease of deposit rates in European countries relative to Italy between 0.3 and 0.7 percentage points. The drop in deposit rates is confirmed by a diff-in-diff analysis run at bank level after implementing a propensity score matching of Italian banks with European ones. We finally show that this effect mainly come from riskier banks confirming that deposit insurance negatively affects deposit rates by reducing the depositors’ required risk-premium.
    Keywords: Deposit Insurance, Bank Deposit Rates, Policy Evaluation
    JEL: G21 G28
    Date: 2019–06–26
  8. By: Nathan Foley-Fisher; Borghan N. Narajabad
    Date: 2019–05–21
  9. By: Paukkeri, Tuuli
    Abstract: This doctoral thesis is a collection of four essays in public economics that look at various public policies and their impacts on low-income and otherwise vulnerable individuals. The essays share the general aim of studying the effectiveness of public policies in achieving their stated goals. The first essay is single-authored by the candidate, and the latter three are collaborations with one or more co-authors. In the first essay, I use a unique dataset compiled from Finnish registers and surveys to provide a comprehensive characterisation of the take-up behavior of Finnish welfare benefits (housing allowance and social assistance) using descriptive methods. I provide various stylised facts on take-up and discuss how income dynamics matter for understanding take-up and benefit targeting. The second essay focuses on the impact of information on benefit takeup. We study the information campaign in the context of the introduction of the guarantee pension program in Finland in 2011 and find that receiving a mailed information letter and application form significantly increased take-up compared to non-recipients. In the the third essay, we analyse the impact of employers’ disability insurance (DI) contributions on the incidence of disability pensions among their workers. Experience rating is used in DI in Finland in order to increase employers’ incentives to prevent disabilities among their workers. We use detailed data and an empirical strategy that allows us to identify the causal effect of experience rating on disability inflow. Our analysis finds that the policy is not effective in reducing disabilities. The fourth essay uses a theoretical framework to provide optimal tax and transfer rules for poverty reduction in developing countries. We modify the standard optimal tax framework by restricting tax instruments to be linear, which are more feasibly implemented in countries with a lower administrative capacity. We show that when we change from the standard objective of welfare maximisation to that of poverty minimisation, which better depicts the concrete objectives of such countries, the optimal tax and transfer rules are changed.
    Keywords: social assistance, housing assistance, guarantee pension, take-up, disability pensions, experience rating, taxation, alikäyttö, asumistuki, maksuluokka, takuueläke, toimeentulotuki, työkyvyttömyyseläkkeet, verotus, Social security, taxation and inequality, D03, D31, H21, H24, H32, H40, H53, H55, I38, J14, J26, O12,
    Date: 2018
  10. By: Bruno Coquet (Observatoire français des conjonctures économiques)
    Abstract: La gouvernance est souvent présentée comme une cause essentielle de la persistance des problèmes que rencontre l’assurance chômage. Cela vise la difficulté des partenaires sociaux à s’accorder pour rétablir la situation financière de l’Unedic. En découle, comme une évidence, que seul un renforcement de l’État, réputé plus avisé et plus réactif, serait à même de sauver le régime. Tout paraît donc simple. Mais quels sont les faits, leurs causes, les causalités qui expliquent l’accumulation des problèmes, et la capacité d’un changement de gouvernance à les résoudre ?
    Keywords: Chômage; Protection sociale; Assurance chômage; Fonds de solidarité; Indemnisation du chômage; Unedic
    Date: 2019–06
  11. By: Setzer, Ralph; Stieglitz, Moritz
    Abstract: We explore the interaction between labour market reforms and financial frictions. Our study combines a new cross-country reform database on labour market reforms with matched firm-bank data for nine euro area countries over the period 1999 to 2013. While we find that labour market reforms are overall effective in increasing employment, restricted access to bank credit can undo up to half of long-term employment gains at the firm-level. Entrepreneurs without sufficient access to credit cannot reap the full benefits of more flexible employment regulation.
    Keywords: labour market reforms,bank stress,employment protection,unemployment insurance
    JEL: G21 J21 J80 K31
    Date: 2019

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