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on Insurance Economics |
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Issue of 2019‒11‒11
eleven papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Givens, Gregory |
| Abstract: | I interpret the empirical evidence on government spending multipliers using an equilibrium model of unemployment in which workers are not fully insured against the risk of job loss. Consumption of resources by the government affects aggregate spending along two margins: (i) an intensive margin owing to a fall in household wealth and (ii) an extensive margin that accounts for growth in the working population. At insurance levels below a certain threshold, the positive effects of (ii) dominate the negative effects of (i), leading to multipliers for private consumption and output that exceed zero and one. Similar results appear in a quantitative version of the model scaled to match estimates from micro data on the consumption cost of unemployment. |
| Keywords: | Government Spending Multipliers, Unemployment Insurance, Shirking Models |
| JEL: | E13 E24 E32 E62 H50 J41 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:96811&r=all |
| By: | Mwabu, Germano |
| Abstract: | The paper reviews the theoretical basis for the application of user fees in the public health sector in low-income countries with particular reference to the special characteristics of medical care as a commodity. The general equilibrium efficiency result of the market mechanism is shown to be the theoretical justification for the financing of health services via a system of user charges. If markets for all goods and services exist, and are perfect in a very strict sense, the welfare outcome of the price mechanism cannot be improved upon by any other resource allocation device. Furthermore, the decentralized and impersonal nature of this mechanism renders it more convenient to use in the allocation of commodities, health care included, than its alternatives such as a system of centrally administered prices or a system of administrative controls and directives. However, since many of the assumptions of the price system are rarely met in actual situations, especially in the health sector, it should be applied with caution. In particular, problems of information asymmetry and consumption externalities in health care markets necessitate a simultaneous use of fees with government interventions in order for fees to achieve their often intended aim of efficiency and equity improvement in health care provision. The most important intervention of the government here is the enactment and enforcement of institutions that reduce costs of transacting in health care markets and that in addition facilitate the emergence of new markets such as the markets for medical insurance. A striking finding of the paper is that health services in low-income countries are best financed primarily by revenue from general taxation, supplemented by a system of moderate user fees. Since medical insurance markets are generally non-existent in low-income areas, it is argued that financing health services primarily through user fees in such areas would be inefficient and inequitable. However, to mitigate the moral hazard problem as well as the problem of the commons, both of which characterize publicly financed health care, imposition of modest user fees is required. The importance of fees in this proposal increases with economic growth and with evolution of institutions that facilitate market transactions. Strategic interaction among economic agents is shown to affect the structure and implementation of user fees. A game-theoretic analysis of the general problem of health care financing shows that this problem is best tackled by harnessing the efforts of households, private health care providers, the government and civil society. These entities form what might be called a winning coalition in health care financing game of society. It is argued that the government is better placed to provide an institutional framework for coordinating the efforts of the various players to the desired end. |
| Keywords: | International Development |
| URL: | http://d.repec.org/n?u=RePEc:ags:widerw:295451&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon) |
| Abstract: | This article examines the relevance of information and communication technology (ICT) in modulating the effect of education on life insurance and non-life insurance consumption in 48 African countries for the period 2004-2014. Education is measured with primary school, secondary school and tertiary school enrollments. ICT is measured with mobile phone, internet and broadband subscriptions. The empirical evidence is based on generalized method of moments. The following main findings are established. First, from the nexuses between education, ICT and life insurance, there are positive conditional effects from the interaction between: (i) broadband subscriptions and primary school enrollment; (ii) broadband subscriptions and secondary school enrollment and (iii) internet penetration and tertiary school enrollment. Second, from the nexuses between education, ICT and non-life insurance: (i) there is a negative net effect from the interactions between mobile phone penetration and primary education while positive net effects are apparent from the interactions between: mobile phone penetration and secondary school enrollment; secondary school enrollment and broadband subscriptions and; tertiary school enrollment and broadband subscriptions. |
| Keywords: | Education; Technology; Insurance |
| JEL: | I28 I20 I30 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:aby:wpaper:19/048&r=all |
| By: | Prescott, Edward Simpson (Federal Reserve Bank of Cleveland); Jarque, Arantxa (Federal Reserve Bank of Richmond) |
| Abstract: | A multi-agent, moral-hazard model of a bank operating under deposit insurance and limited liability is used to analyze the connection between compensation of bank employees (below CEO) and bank risk. Limited liability with deposit insurance is a force that distorts effort down. However, the need to increase compensation to risk-averse employees in order to compensate them for extra bank risk is a force that reduces this effect. Optimal contracts use relative performance and are implementable as a wage with bonuses tied to individual and firm performance. The connection between pay for performance and bank risk depends on correlation of returns. If employee returns are uncorrelated, the form of pay is irrelevant for risk. If returns are perfectly correlated, a low wage can indicate risk. Connections to compensation regulation and characteristics of organizations are discussed. |
| Keywords: | incentive compensation; relative performance; bank regulation; |
| JEL: | D82 G21 G28 J33 |
| Date: | 2019–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:192000&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | Purpose –This study investigates the role of financial access in moderating the effect of governance on insurance consumption in 42 Sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach – Two life insurance indicators are used, notably: life insurance and non-life insurance. Six governance measurements are also used, namely: political stability, “voice & accountability†, government effectiveness, regulation quality, corruption-control and the rule of law. The empirical evidence is based on the Generalised Method of Moments (GMM) and Least Squares Dummy Variable Corrected (LSDVC) estimators. Findings –Estimations from the LSDVC are not significant while the following main findings are established from the GMM. First, financial access promotes life insurance through channels of political stability, “voice & accountability†, government effectiveness, the rule of law and corruption-control. Second, financial access also stimulates non-life insurance via governance mechanisms of political stability, “voice & accountability†, government effectiveness, regulation quality, the rule of law and corruption-control. Originality/value – This research complements the sparse literature on insurance promotion in Africa by engaging the hitherto unexplored role of financial access through governance channels. |
| Keywords: | Insurance; Finance; Governance; Sub-Saharan Africa |
| JEL: | I28 I30 G20 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:aby:wpaper:19/044&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | Purpose –This study investigates the role of ICT in modulating the effect of governance on insurance penetration in 42 sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach –Two insurance indicators are used in the analysis, namely: life insurance and non-life insurance. The three ICT modulating dynamics employed include: mobile phone penetration, internet penetration and fixed broadband subscriptions. Six governance channels are also considered, namely: political stability, “voice & accountability†, regulation quality, government effectiveness, the rule of law and corruption-control. The empirical evidence is based on generalized method of moments. Findings –The following main findings are established. First, mobile phone penetration does not significantly modulate governance channels to positively affect life insurance while it effectively complements “voice & accountability†to induce a positive net effect on non-life insurance. Second, internet penetration complements: (i) governance dynamics of political stability, government effectiveness and rule of law to induce positive net effects on life insurance: and (ii) corruption-control for an overall positive effect on non-life insurance. Third, the relevance of fixed broadband subscriptions in promoting life insurance is apparent via governance channels of regulation quality, government effectiveness and the rule of law while fixed broadband subscriptions do not induce significant overall net effects on non-life insurance though the conditional effects are overwhelmingly significant. Orginality/value – To the best our knowledge, studies on the relevance of ICT in promoting insurance consumption through governance channels are sparse, especially for a region such as sub-Saharan Africa where insurance penetration is low compared to other regions of the world. |
| Keywords: | Africa; ICT; Governance; Insurance |
| JEL: | G20 I28 I30 L96 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:aby:wpaper:19/043&r=all |
| By: | Bullard, James B. (Federal Reserve Bank of St. Louis) |
| Abstract: | During a presentation in London, St. Louis Fed President James Bullard noted that the U.S. economy is slowing down relative to 2017 and 2018. The economy faces downside risk that may cause a sharper-than-expected slowdown, which “may make it more difficult for the Federal Open Market Committee (FOMC) to achieve its 2% inflation target,” he said. |
| Date: | 2019–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:350&r=all |
| By: | Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa) |
| Abstract: | This study investigates the role of insurance in economic growth on a panel of forty-eight countries in Africa for the period 2004-2014. The research question the study seeks to answer is the following: what thresholds of insurance penetration positively affect economic growth in Africa? The empirical evidence is based on Generalized Method of Moments. Life insurance increases economic growth while the effect of non-life insurance is not significant. Increasing both life insurance and non-life insurance has negative net effects on economic growth. From an extended analytical exercise, 4.149 of life insurance premium (% of GDP) is the minimum critical mass required for life insurance to positively affect economic prosperity while 1.805 of non-life insurance premium (% of GDP) is the minimum threshold required for non-life insurance to positively affect economic prosperity. Thresholds are also provided from the Hansen (1999) Panel Threshold Regression technique using a balanced sample of 28 countries. |
| Keywords: | Insurance; Economic Growth |
| JEL: | I28 I30 G20 O16 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:aby:wpaper:19/037&r=all |
| By: | Bullard, James B. (Federal Reserve Bank of St. Louis) |
| Abstract: | St. Louis Fed President James Bullard welcomed community bankers, academics, policymakers and bank regulators to the seventh annual Community Banking in the 21st Century research and policy conference. The conference is sponsored by the Federal Reserve System, the Conference of State Bank Supervisors and the Federal Deposit Insurance Corp. |
| Date: | 2019–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:349&r=all |
| By: | Jackson, Emerson Abraham |
| Abstract: | This article provides an examination of market failure, focusing on the health service system (HSS) in Sierra Leone. Market failure in the country’s HSS is a real concern, and has gone unchecked for decades by successive governments. In view of the prevailing conditions, it is noted that government failure is to be blamed for poor conditions experienced in the health sector. The issue of squeezed funding for management of the HSS must be revisited in order to address critical health concerns in the country. Most important to this is the continued rent-seeking that health professionals have thrived on as a free-riding venture, increasing their profit share, while (non-deliberately) depriving the poor and needy of affordable services in state-funded hospitals and healthcare centres. While rent-seeking has been on the rise, conditions of service have fallen behind those needed for health professionals to maintain a decent standard of living, hence the need for government to intervene to mitigate its continuing failure in the country’s HSS. |
| Keywords: | Market Failure, Government Failure, Health Care, Sierra Leone |
| JEL: | H40 Q30 |
| Date: | 2019–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:96767&r=all |
| By: | Kurt J. Lavetti; Thomas DeLeire; Nicolas R. Ziebarth |
| Abstract: | The ACA requires insurers to provide cost-sharing reductions (CSRs) to low-income consumers on the marketplaces. We link 2013-2015 All-Payer Claims Data to 2004-2013 administrative hospital discharge data from Utah and exploit policy-driven differences in the value of CSRs that are solely determined by income. We find that enrollees with lower cost sharing have higher levels of health care spending, controlling for past health care use. We estimate the demand elasticity of total health care spending to be -0.10, but find larger elasticities for emergency room care, lifestyle drugs, and low-value care. We also find positive cross-price elasticities between outpatient and inpatient care. |
| JEL: | H24 H41 H43 H51 I11 I18 J32 J33 J68 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26430&r=all |