|
on Insurance Economics |
|
Issue of 2019‒09‒30
nineteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Juergen Jung (Towson University); Chung Tran (Australian National University) |
| Abstract: | We quantitatively explore the welfare benefits of health insurance over the lifecycle in a dynamic general equilibrium model with health risk and a health care sector. We consider three distinct approaches to designing a health insurance system: (i) a mixed private and public health insurance system similar to the US system, (ii) private health insurance (PHI), and (iii) universal public health insurance (UPHI). Our results indicate that the introduction of the US system into an economy without any health insurance results in large welfare gains, but does not produce the best welfare outcome. The PHI system with some government regulation on premiums is viable and produces welfare gains comparable to the welfare gains generated by the US system. The UPHI system with a high enough coinsurance rate produces better overall welfare outcomes than the other two systems. There exists an optional coinsurance rate that maximizes the welfare benefits of the UPHI system. A structural reform that replaces the US system with the UPHI system—i.e., Medicare for all—is welfare improving, but would face political headwinds due to opposing welfare effects across income groups. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:690&r=all |
| By: | Grumstrup, Ethan (University of Nevada, Reno); Mobarak Hossain, Md. (University of Nevada, Reno); Mukhopadhyay, Sankar (University of Nevada, Reno); Shapoval, Olga (University of Nevada, Reno) |
| Abstract: | In this paper, we examine whether the expansion of health insurance coverage brought on by the Patient Protection and Affordable Care Act of 2010 (ACA), led to a decline in absenteeism among overweight and obese individuals. We use data from the National Health Insurance Survey (NHIS) to compare absenteeism among overweight and obese workers to absenteeism among normal-weight workers before and after the ACA. Our results suggest that in the post-ACA period, the probability of being absent declined by about 1.3 (1.5) percentage points among obese (overweight) individuals. Disaggregated regressions suggest that the effect is significant among women, but not among men. Furthermore, our estimates (using a Tobit model) indicate that the obese (overweight) workers missed 0.33 (0.46) fewer days after the ACA. Again, the effect is concentrated among women. Our results show that improved health outcomes led to reduced absenteeism. Our results also show that there are no decline in absenteeism among elderly (age>=65) adults (who did not experience any increase in health insurance coverage as a result of the ACA), suggesting that the decline in absenteeism is indeed due to the expansion of health insurance coverage due to the ACA. Our estimates imply that the ACA reduced the cost associated with absenteeism by about $350 million per year. |
| Keywords: | Affordable Care Act, obesity, overweight, absenteeism |
| JEL: | I13 I18 J08 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12617&r=all |
| By: | Elisabeth Paul; Jean-Pierre Wangbe; Fabienne Fecher-Bourgeois; Marc Bourgeois |
| Abstract: | Introduction: In its pursuance of universal health coverage (UHC), the government of Benin has launched an ambitious reform of the health sector governance and has recently started to implement a policy of mandatory social insurance for health through the so-called Assurance pour le Renforcement du Capital Humain (ARCH) project. This raises important fiscal challenges, both at the revenue mobilisation and at the spending levels.Aim: We analyse the fiscal challenges raised by the launch of State-subsidised mandatory social health insurance in Benin.Methods: We analysed fiscal data and ARCH documents, and performed interviews with over 40 representatives of the government, development partners, private insurers and other resource persons during two mission in Benin in March 2018 and April 2019. Results are presented along the three classical objective or functions of public expenditure management.1Results: The government of Benin faces important fiscal challenges to implement the ARCH social insurance project: (i) regarding aggregate fiscal discipline, the fiscal space is quite limited, there is little room for raising new revenues, hence the necessity to re-prioritise fiscal resources without jeopardising other areas; (ii) regarding resource allocation and use based on strategic priorities, purchasing of health services will need to be more strategic so as to increase allocative efficiency and equity; (iii) regarding efficiency and effectiveness of programmes and service delivery, the fluidity of the expenditure process will have to be improved, and more autonomy will have to be devoted to the operational level, so as to ensure health facilities are reimbursed in time for insured people’s health costs, so as not to jeopardize their financial equilibrium.Conclusion: Benin faces important fiscal challenges to implement its UHC policy, which are also faced by many other African countries. An important risk to be avoided is to ensure that the resources dedicated by the government to the social health insurance system are not compensated by a reduction in the financing of preventive and promotional health services.Reference(s):1. World Bank. Public Expenditure Management Handbook. 1998; Washington, D.C. 178 pages. |
| Keywords: | Universal health coverage; Financing; Benin; Africa; Fiscal space; Strategic purchasing |
| Date: | 2019–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/293227&r=all |
| By: | Marielle Brunette (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique); Stéphane Couture (MIAT INRA - Unité de Mathématiques et Informatique Appliquées de Toulouse - INRA - Institut National de la Recherche Agronomique); Anne Corcos (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - UP2 - Université Panthéon-Assas - Sorbonne Universités); Francois Pannequin (ENS Cachan - École normale supérieure - Cachan) |
| Abstract: | An insurer can monitor the policyholder's prevention effort when it is observable ex-post by using a contract clause. The literature on insurance contracts does not explicitly address the role of contract clauses. We examine the role of such clauses in case of self-insurance. Because of the substitutability between insurance and self-insurance, contract clauses focused on self-insurance investments could cause a possible deterrent effect on insurance demand, highlighting their puzzling nature. In a theoretical model, we examine two arguments to overcome the compulsory self-insurance clause paradox: the observability of the self-insurance investment and the role of the self-insurance clause on insurance demand. The fact that self-insurance investments are not observable ex-ante cannot justify the use of a mandatory clause. Neither the demand for insurance nor the demand for prevention is observability-dependent. Therefore, self-insurance clauses are, at best, useless, at worst, counterproductive: when binding, they reduce the size of the insurance market. |
| Keywords: | clause du contrat,auto assurance |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02121860&r=all |
| By: | Avihai Lifschitz (Tel Aviv University); Ofer Setty (Tel Aviv University); Yaniv Yedid-Levi (Interdisciplinary Center (IDC) Herzliya) |
| Abstract: | Labor market outcomes demonstrate considerable variation between and within skill groups. We construct a general equilibrium model with incomplete markets and exogenous differences that matches these facts. We study the role of exogenous heterogeneity in choosing the optimal re- placement rate and the maximum benefit for an unemployment insurance (UI) system. The optimal average replacement rate is 54%, compared to 10% in a model without the features of exogenous heterogeneity. The relatively generous choice in our model is due to the redistributive role of UI – a manifestation of two elements. First, workers who are unemployed more often receive positive net transfers from the UI system because they draw resources more frequently. Second, the existence of a cap makes UI benefits progressive. Our main result holds even in the presence of a generous progressive taxation system. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:391&r=all |
| By: | Rene Chalom (Federal Reserve Bank of New York); Benjamin Pugsley (University of Notre Dame); Fatih Karahan (Federal Reserve Bank of New York); Kurt Mitman (Stockholm University) |
| Abstract: | Recipients of unemployment insurance benefits may allocate payouts towards consumption, savings, or servicing outstanding debt. This paper examines the effects that unemployment benefits have on mortgage, automobile loan, and credit card debt delinquency, exploiting the variation across states in the magnitude of unemployment benefit extensions that were provided in response to the Great Recession. We find that additional unemployment benefits reduced mortgage debt delinquency in locations that avoided large home price declines in the aftermath of the recession. Accordingly, we conclude that the stimulus effects of unemployment insurance may be muted to the extent that benefit payments are used to satisfy housing debt obligations. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:438&r=all |
| By: | Roel Verbelen; Katrien Antonio; Gerda Claeskens |
| Abstract: | A data set from a Belgian telematics product aimed at young drivers is used to identify how car insurance premiums can be designed based on the telematics data collected by a black box installed in the vehicle. In traditional pricing models for car insurance, the premium depends on self-reported rating variables (e.g. age, postal code) which capture characteristics of the policy(holder) and the insured vehicle and are often only indirectly related to the accident risk. Using telematics technology enables tailor-made car insurance pricing based on the driving behavior of the policyholder. We develop a statistical modeling approach using generalized additive models and compositional predictors to quantify and interpret the effect of telematics variables on the expected claim frequency. We find that such variables increase the predictive power and render the use of gender as a rating variable redundant. |
| Keywords: | Pay-as-you-drive insurance, Usage-based insurance, Risk classification, Generalized additive models, Compositional predictors, Structural zeros |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:kbiper:618916&r=all |
| By: | Roel Verbelen; Katrien Antonio; Gerda Claeskens |
| Abstract: | A data set from a Belgian telematics product aimed at young drivers is used to identify how car insurance premiums can be designed based on the telematics data collected by a black box installed in the vehicle. In traditional pricing models for car insurance, the premium depends on self-reported rating variables (e.g. age, postal code) which capture characteristics of the policy(holder) and the insured vehicle and are often only indirectly related to the accident risk. Using telematics technology enables tailor-made car insurance pricing based on the driving behavior of the policyholder. We develop a statistical modeling approach using generalized additive models and compositional predictors to quantify and interpret the effect of telematics variables on the expected claim frequency. We find that such variables increase the predictive power and render the use of gender as a rating variable redundant. |
| Keywords: | Pay-as-you-drive insurance, Usage-based insurance, Risk classification, Generalized additive models, Compositional predictors, Structural zeros |
| Date: | 2018–03 |
| URL: | http://d.repec.org/n?u=RePEc:ete:afiper:618916&r=all |
| By: | Joseph E. Stiglitz; Jungyoll Yun; Andrew Kosenko |
| Abstract: | We study the Rothschild-Stiglitz model of insurance markets, introducing endogenous information disclosure about insurance sales and purchases by firms and consumers. We show that a competitive equilibrium exists under unusually mild conditions, and characterize the unique equilibrium outcome. With two types of consumers the outcome is particularly simple, consisting of a pooling contract which maximizes the well-being of the low risk individual (along the zero profit pooling line) plus a supplemental (undisclosed and nonexclusive) contract that brings the high risk individual to full insurance (at his own odds). We show that this outcome is extremely robust and constrained Pareto efficient. Asymmetric equilibrium information flows with endogenous consumer disclosure are critical in supporting the equilibrium. |
| JEL: | D43 D82 D86 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26251&r=all |
| By: | Michael Levere |
| Abstract: | This paper explores the causal impact of receiving Supplemental Security Income benefits during childhood on labor market earnings and SSI benefit receipt in adulthood. |
| Keywords: | Disability, Supplemental Security Income, Program Participation, Youth, Employment, Zebley |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:bd1003b8adde4581bf7df4c004098e50&r=all |
| By: | Benjamin Griffy (University at Albany, SUNY); Stanislav Rabinovich (University of North Carolina - Chapel Hi) |
| Abstract: | How large are the effects of unemployment insurance on re-employment wages? Search theory holds that UI increases accepted wages by making workers more selective about the jobs they accept. We show that the standard search model puts strong testable restrictions on the magnitude of this selectivity effect, given observed worker flows. A simple formula links the effect of UI on wages to its effect on job-finding hazard and to the size of frictional wage dispersion. Given the model-implied magnitude of the latter, the implied wage gain from UI cannot be very large. Our own empirical analysis using SIPP shows that, for high-wealth workers, the effects of UI on both duration and wages are close to zero, consistent with the model’s predictions. However, for liquidity- constrained workers, the estimated wage effect of UI is substantially larger than what a standard search model implies given its estimated effect on the job-finding hazard. We conclude that large estimated wage gains from UI are likely not due to selectivity alone. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:1270&r=all |
| By: | Zhuo Jin; Huafu Liao; Yue Yang; Xiang Yu |
| Abstract: | This paper studies the optimal dividend for a multi-line insurance group, in which each insurance company is exposed to some external credit default risk. The external default contagion is considered in the sense that one default event can affect the default probabilities of all surviving insurance companies. The total dividend problem is formulated for the insurance group and we reveal for the first time that the optimal singular dividend strategy is still of the barrier type. Furthermore, we show that the optimal barrier for each insurance company is modulated by the current default state, namely how many and which companies have defaulted will determine the dividend threshold for each surviving company. These interesting conclusions match with observations from the real market and are based on our analysis of the associated recursive system of Hamilton-Jacobi-Bellman variational inequalities (HJBVIs), which is new to the literature. The existence of classical solution is established and the rigorous proof of the verification theorem is provided. For the case of two companies, the value function and optimal barriers for each company can be explicitly constructed. |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1909.09511&r=all |
| By: | Tal Gross; Raymond Kluender; Feng Liu; Matthew J. Notowidigdo; Jialan Wang |
| Abstract: | A more generous consumer bankruptcy system provides greater insurance against financial risks, but it may also raise the cost of credit to consumers. We study this trade-off using the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which raised the costs of filing for bankruptcy. We identify the effects of BAPCPA on borrowing costs by exploiting variation in the effects of the reform on bankruptcy risk across credit-score segments. Using a combination of administrative records, credit reports, and proprietary market-research data, we find that the reform reduced bankruptcy filings, and reduced the likelihood that an uninsured hospitalization received bankruptcy relief by 70 percent. BAPCPA led to a decrease in credit card interest rates, with an implied pass-through rate of 60–75 percent. Overall, BAPCPA decreased the gap in offered interest rates between prime and subprime consumers by roughly 10 percent. |
| JEL: | D14 G21 G28 K35 L13 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26254&r=all |
| By: | Averett, Susan L. (Lafayette College); Smith, Julie K. (Lafayette College); Wang, Yang (University of Wisconsin-Madison) |
| Abstract: | States are increasingly resorting to raising the minimum wage to boost the earnings of those at the bottom of the income distribution. In this paper, we examine the effects of minimum wage increases on the health of the children of immigrants. Their parents are disproportionately represented in minimum wage jobs, typically have less access to health care and are a growing part of the U.S. labor force. Using a difference-in-differences identification strategy and data drawn from the National Health Interview Survey from the years 2000 - 2015, we examine whether children of low-educated immigrants experience any changes in health or access to care when the minimum wage increases. |
| Keywords: | minimum wage, immigrant children, access to care, health insurance, health |
| JEL: | J15 I12 I13 I14 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12606&r=all |
| By: | Hengjie Ai (University of Minnesota); Anmol Bhandari (University of Minnesota); Chao Ying (University of Minnesota); Yuchen Chen (University of Minnesota) |
| Abstract: | This paper shows that factor misallocation is closely tied to the risk-sharing avenues available to firm owners. In contrast to the commonly studied bond-only economy with collateral constraints (for example Moll (2014)), we find that the degree of misallocation is increasing in persistence of the idiosyncratic risk when firms have access to state-contingent contracts. The possibility to transfer wealth from high productivity states to low productivity states allows firm owners to trade off efficient allocation of consumption against efficient allocation of capital. We show that for reasonable values of risk aversion, insurance needs more than offset production efficiency concerns and thereby generates large capital misallocation. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed019:1215&r=all |
| By: | Itzik Fadlon; Jessica N. Van Parys |
| Abstract: | Primary care physicians (PCPs) provide frontline health care to patients in the U.S.; however, it is unclear how their practice styles affect patient care. In this paper, we estimate the long-lasting effects of PCP practice styles on patient health care utilization by focusing on Medicare patients affected by PCP relocations or retirements, which we refer to as "exits." Observing where patients receive care after these exits, we estimate event studies to compare patients who switch to PCPs with different practice style intensities. We find that PCPs have large effects on a range of aggregate utilization measures, including physician and outpatient spending and the number of diagnosed conditions. Moreover, we find that PCPs have large effects on the quality of care that patients receive, and that all of these effects persist for several years. Our results suggest that switching to higher-quality PCPs could significantly affect patients' longer-run health outcomes. |
| JEL: | I11 I13 I18 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26269&r=all |
| By: | Gastón Illanes; Manisha Padi |
| Abstract: | Retirement policy has indirect effects on its beneficiaries, through the “crowd-out” or “crowd-in” of insurance markets. We study how retirement policy in Chile, which limits the drawdown of retirement assets but otherwise does not provide or require fixed income in retirement, results in more than 60% of eligible retirees purchasing private annuities at low prices. We estimate a demand model to show that replacing this voluntary policy with partial mandatory annuitization and removing limits on drawdowns causes the private annuity market to partially unravel. Under our model, this reform leads to a welfare increase equivalent to US$4,000 of additional pension savings on average, but welfare effects are heterogenous and many retirees would be harmed due to the higher prices of private annuities. Our results highlight the importance of considering the impact of policy reforms on the equilibria of related markets. |
| JEL: | D82 G22 G28 H31 H44 |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26285&r=all |
| By: | Huertas, Thomas F. |
| Abstract: | To complete banking union, there should be a single European deposit insurance scheme (EDIS) alongside the single supervisor and the single resolution authority. This would ensure uniformity across the Eurozone and facilitate the removal of barriers to the mobility of liquidity and capital within the single market. That in turn would promote efficiency in the banking sector and in the economy at large - just at the time that the EU needs to boost growth in order to remain competitive with the US and China. The EDIS promise to promptly reimburse insured deposits at a failed bank in the Eurozone should be unconditional. But who will stand behind that commitment? Who is the "E" in EDIS? Is its promise credible, even in a crisis? If a deposit guarantee scheme fails to deliver what people expect, panic would very likely erupt. Instead of strengthening financial stability, deposit insurance could destroy it. Yet this is the risk that current proposals pose. They create the impression that there will be a single deposit guarantee scheme. There will not. Instead, there will be a complex set of liquidity and reinsurance arrangements among Member State schemes. These defects need to be remedied. To do so, we propose creating a European Deposit Insurance Corporation (EDIC) alongside national schemes. For banks that meet EDIC's strict entry criteria and decide to become members, EDIC will promise to reimburse promptly - in the event the member bank fails - 100 cents on the euro in euro for each euro of insured deposits, regardless of the Eurozone Member State in which the bank is headquartered. In effect, the single deposit guarantee scheme would be created via migration to EDIC rather than mutualisation of existing schemes. This would increase the mobility of capital and liquidity and lead to a convergence of interest rates across the Eurozone. That in turn will improve the effectiveness of monetary policy, foster integration and promote growth. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:63&r=all |
| By: | Alain de Janvry (ARE - Department of Agricultural and Resource Economics [Berkeley] - University of California [Berkeley] - University of California, FERDI - Fondation pour les Etudes et Recherches sur le Développement International, University of California [Berkeley] - University of California); Elisabeth Sadoulet (ARE - Department of Agricultural and Resource Economics [Berkeley] - University of California [Berkeley] - University of California, FERDI - Fondation pour les Etudes et Recherches sur le Développement International, University of California [Berkeley] - University of California) |
| Abstract: | For most poor countries of today, investing in agriculture and the associated sectoral linkages is the most promising strategy for sustained growth and poverty reduction. Yet, in these countries, investment in agriculture has generally been lagging relative to international norms and recommendations. We start from the premise that this has been due to lack of success in modernizing the operations of smallholder farmers (SHF) that typically constitute the core of the farm population. These farmers are linked to consumers through value chains that range from the most elementary (local spot markets) to the most advanced (contract farming and out-grower schemes). Current wisdom with cases of successful modernization of smallholder farming is that it requires asset building, productivity growth in staple foods (Green Revolution), agricultural transformation (diversification of farming systems toward high value crops), and rural transformation (value addition through rural non-farm activities linked to agriculture). … /… Key words: Constraints removal approach: constraints to modernization originating in credit, insurance, information, and access to deep markets. Inclusive value chain development approach: incentives to modernize originating in access to assets, contracts, producer organizations discipline, and value chain coordination. |
| Date: | 2019–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02287668&r=all |