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on Insurance Economics |
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Issue of 2019‒12‒16
eighteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Marios Michaelides; Peter Mueser; Jeffrey Smith |
| Abstract: | We present experimental evidence on the effects of four U.S. job search assistance programs for unemployed youth during the Great Recession. Results show that all four programs reduced Unemployment Insurance (UI) duration and the benefit amounts collected by youth participants, with savings exceeding program costs. The three programs that included monitoring activities and services referrals but did not mandate services participation had little or no effects on employment and earnings. This suggests that the primary effect of these programs was to cause the early UI exits of unemployed youth with no loss of earnings. The program that combined monitoring with mandatory job counseling increased employment rates and earnings, suggesting that job counseling can help unemployed youth to improve their job search efficacy. We conclude that, during recessions, job search assistance programs should focus primarily on providing job counseling and provide less emphasis on monitoring activities for unemployed youth. |
| Keywords: | Youth; Great Recession; job counseling; active labor market policies; unemployment; Unemployment Insurance; program evaluation |
| JEL: | J6 H4 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ucy:cypeua:13-2019&r=all |
| By: | Matthew S. Rutledge; Gal Wettstein; Sara Ellen King |
| Abstract: | Recent research has called attention to alternative employment arrangements that often leave workers without retirement and health benefits and with income instability. At the same time, workers are facing increasing competition from automation and globalization. This competition is of special concern for older workers, who increasingly need longer careers to secure an adequate retirement and jobs with benefits to enable saving and access to affordable health care. The question is: are these “nontraditional” jobs more prevalent in areas more exposed to such competitive pressures and are older workers more likely to hold them? The study uses the 1996-2008 panels of the Survey of Income and Program Participation to track the share of workers in nontraditional work arrangements – defined based on characteristics of the job including retirement plan coverage, health insurance coverage, and hour or wage instability. It then estimates whether workers are more likely to be in nontraditional arrangements, or transition from traditional to nontraditional work, in areas with greater exposure to trade and automation. The findings suggest that globalization does not have a major effect, but automation does; a 1-standard deviation increase in the use of industrial robots is associated with an 11-percent increase in nontraditional employment. This relationship is even stronger for older workers: a 1-standard-deviation increase in automation is associated with a 17-percent increase in nontraditional work at ages 50-62. As automation continues to increase, jobs that offer retirement savings, health insurance, and stable income may continue to decline, and the impact is likely to be particularly felt by older workers who may need these benefits the most. |
| Date: | 2019–07 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2019-10&r=all |
| By: | Burke, Mary A. (Federal Reserve Bank of Boston) |
| Abstract: | This paper assesses the prevalence of medication-assisted treatment (MAT) among treatment episodes for opioid use disorder (OUD) in Rhode Island, as compared with the remaining New England states and the United States as a whole. Based on the Treatment Episode Data Set (TEDS-A), a national census of admissions into publicly funded treatment facilities for substance use disorders, we find that during the period beginning in 2000 through 2017, Rhode Island exhibited a greater tendency to use MAT as part of OUD treatment compared with the average state in the United States and compared with the average combined tendency among the five other New England states. Logistic regression analysis reveals that the higher incidence of MAT among OUD treatment episodes in Rhode Island compared with the US average can be partly accounted for by Rhode Island’s having (1) a higher share of patients with government-sponsored health insurance plans, (2) an older age profile of patients, (3) a higher share of married patients, and (4) a higher percentage of intravenous drug users. However, well over half of the difference in the MAT rate between Rhode Island and rest of the United States is due to differences in factors not observed in the TEDS-A but which are known to prevail in the state, such as Rhode Island’s high number of methadone clinics per capita, its high federal funding rate per capital to combat substance abuse, and state policies promoting the use of MAT. |
| Keywords: | opioid use disorder; medication-assisted treatment; Rhode Island; treatment episode data set |
| JEL: | I12 I13 I18 |
| Date: | 2019–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:2019_002&r=all |
| By: | Karahan, Fatih (Federal Reserve Bank of New York); Mitman, Kurt (Stockholm University); Moore, Brendan (Federal Reserve Bank of New York) |
| Abstract: | We develop a method to jointly measure the response of worker search effort (individual effect) and vacancy creation (market-level effect) to changes in the duration of unemployment insurance (UI) benefits. To implement this approach, we exploit an unexpected cut in UI durations in Missouri and provide quasi-experimental evidence on the effect of UI on the labor market. The data indicate that the cut in Missouri significantly increased job finding rates by both raising the search effort of unemployed workers and the availability of jobs. The latter accounts for at least a third and up to 100% of the total effect. |
| Keywords: | unemployment insurance, unemployment, vacancies, search |
| JEL: | E24 J63 J64 J65 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12805&r=all |
| By: | Coyle, Brian M |
| Abstract: | This paper helps to satisfy the need to analyze the expansion of government administration, called for by healthcare reform. The scale of any enterprise that attempts to cover the entire US is vast. Scale impacts administration. Management is constrained by supervision and learning. This is addressed with hierarchy. But as hierarchical layers increase, effectiveness diminishes. US healthcare delivery is in a state of flux. Proposed major reforms include "Medicare for All," which may extend a UK NHS-like program to all US residents, and a "Public Option" which may extend a government-run insurance program to US residents who choose it. Debate over these proposals has concerned costs. This paper analyses their administrative requirements. It finds these ignored in some plans, and explains why. Examples from other countries demonstrate how scale is managed in healthcare delivery, in smaller nations and some large ones. Administration of major medical reforms across the vast US market will take a decade or longer to roll-out. This process that must be carefully managed, to ensure healthcare outcomes, to meet expectations, and to maintain political support. The optimal process will exploit inherent regionalisation, seeding new programs in areas with equal population sizes and ethnic compositions. These conclusions are based on international and US historical evidence. |
| Date: | 2019–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:wmfyr&r=all |
| By: | Diagne, Mandiaye; Saito, Kazuki; Diagne, Aliou |
| Keywords: | Agricultural Finance, Risk and Uncertainty |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaae19:295902&r=all |
| By: | Alicia H. Munnell; Gal Wettstein; Wenliang Hou |
| Abstract: | Unlike defined benefit pensions that provide participants with steady benefits for as long as they live, 401(k) plans and Individual Retirement Accounts (IRAs) provide little guidance on how to turn accumulated assets into income. As a result, retirees have to decide how much to withdraw each year and face the risk of either spending too quickly and outliving their resources or spending too conservatively and consuming too little. Surveys of individuals’ plans and several recent studies suggest that people will not draw down their accumulations for fear that they will exhaust their money and be unable to cover end-of-life health care costs. They also must consider how to invest their savings after retirement. These are difficult decisions. Better strategies are possible that will ensure a higher level of lifetime income, reduce the likelihood that people will outlive their resources, and alleviate some of the anxiety associated with post-retirement investing. Workers could use a portion of their 401(k) and IRA assets to purchase an immediate annuity that pays a fixed amount throughout their lives, typically starting at age 65. Or they could purchase an advanced life deferred annuity (ALDA) that requires a smaller share of accumulated assets and begins payments at a later age like 85. Alternatively, they could use their assets to delay claiming Social Security – essentially purchasing an inflation-indexed annuity. Right now, none of these three options is commonly used. Very few workers choose to purchase immediate or deferred annuities (the first two options). And few retirees appear to be deferring claiming in order to receive the maximum annuity income from Social Security – most people simply retire earlier and claim immediately. Increasing annuitization in a meaningful way would require embedding annuities in 401(k) plans, with annuitization as the default. Recent proposed federal legislation, such as the SECURE Act (Setting Every Community Up for Retirement Enhancement), encourages plan sponsors to offer annuities in their plans by establishing a fiduciary safe harbor when specific statutory conditions are followed in selecting an insurance company. This legislation does not address, however, the question of defaults or the possibility of using 401(k) assets to purchase additional Social Security benefits. Moving forward on these fronts would require some consensus about the appropriate share of 401(k) assets to be annuitized and the best method for annuitizing them. To address these issues, this paper compares the level of lifetime utility generated by alternative annuitization approaches – immediate annuities, deferred annuities, and additional Social Security through delayed claiming. The analysis also tests different assumptions for the share of initial wealth that participants use to purchase these products. |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2019-13&r=all |
| By: | Ryuichiro Izumi (Department of Economics, Wesleyan University) |
| Abstract: | What are the effects of banks holding opaque, complex assets? Should regulators require bank assets to be more transparent? I study these questions in a model of fnancial intermediation where opacity determines how long the realized value of an asset remains unknown. By allowing a bank to sell assets before the realization is known, opacity provides insurance to the bank's depositors. However, higher opacity also increases depositors' incentives to join a bank run. In choosing the level of opacity, therefore, a bank faces a trade-off between providing insurance and increasing fragility. If depositors can accurately observe the level of opacity, banks will choose the socially-effcient level. If depositors are unable to observe this choice, however, banks will have an incentive to become overly opaque and regulation to limit opacity can improve welfare. |
| Keywords: | Opacity, Bank runs, Insurance, Banking regulation |
| JEL: | G01 G21 G28 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2019-005&r=all |
| By: | Hippolyte d'Albis (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); Giuseppe Attanasi (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique); Emmanuel Thibault (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - CNRS - Centre National de la Recherche Scientifique - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales) |
| Keywords: | Self-insurance,annuity,uncertain survival probabilities,smooth ambiguity aversion,charity,experiment |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02132858&r=all |
| By: | Ayinde, Opeyemi Eyitayo; Mario, Miranda; Adewumi, Matthew Olaniyi |
| Keywords: | Environmental Economics and Policy, Resource /Energy Economics and Policy |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaae19:295938&r=all |
| By: | Zhiguo He; Paymon Khorrami; Zhaogang Song |
| Abstract: | Two intermediary-based factors - a broad financial distress measure and a dealer corporate bond inventory measure - explain about 50% of the puzzling common variation of credit spread changes beyond canonical structural factors. A simple model, in which intermediaries facing margin constraints absorb supply of assets from customers, accounts for the documented explanatory power and delivers further implications with empirical support. First, whereas bond sorts on margin-related variables (credit rating and leverage) produce monotonic patterns in loadings on intermediary factors, non-margin-related sorts produce no pattern. Second, dealer inventory co-moves with corporate-credit assets only, whereas intermediary distress co-moves even with non-corporate-credit assets. Third, dealers' inventory increases, and bond prices decline, in response to instrumented bond sales by institutional investors, using severe downgrades ("fallen angels'') and disaster-related insurance losses as IVs. |
| JEL: | G12 G22 G23 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26494&r=all |
| By: | Geruso, Michael (University of Texas at Austin); Layton, Timothy J. (Harvard University); McCormack, Grace (Harvard University); Shepard, Mark (Harvard Kennedy School) |
| Abstract: | Insurance markets often feature consumer sorting along both an extensive margin (whether to buy) and an intensive margin (which plan to buy). We present a new graphical theoretical framework that extends a workhorse model to incorporate both selection margins simultaneously. A key insight from our framework is that policies aimed at addressing one margin of selection often involve an economically meaningful tradeoff on the other margin in terms of prices, enrollment,and welfare. Using data from Massachusetts, we illustrate these tradeoffs in an empirical sufficient statistics approach that is tightly linked to the graphical framework we develop. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp19-035&r=all |
| By: | Ndegwa, Michael K.; Shee, Apurba; Turvey, Calum G.; You, Liangzhi |
| Keywords: | Agricultural Finance |
| Date: | 2019–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaae19:295782&r=all |
| By: | Shepard, Mark (Harvard Kennedy School); Baicker, Katherine (University of Chicago); Skinner, Jonathan (Dartmouth College) |
| Abstract: | There is increasing interest in expanding Medicare health insurance coverage in the U.S., but it is not clear whether the current program is the right foundation on which to build. Traditional Medicare covers a uniform set of benefits for all income groups and provides more generous access to providers and new treatments than public programs in other developed countries. We develop an economic framework to assess the efficiency and equity tradeoffs involved with reforming this generous, uniform structure. We argue that three major shifts make a uniform design less efficient today than when Medicare began in 1965. First, rising income inequality makes it more difficult to design a single plan that serves the needs of both higher- and lower-income people. Second, the dramatic expansion of expensive medical technology means that a generous program increasingly crowds out other public programs valued by the poor and middle class. Finally, as medical spending rises, the tax-financing of the system creates mounting economic costs and increasingly untenable policy constraints. These forces motivate reforms that shift towards a more basic public benefit that individuals can “top-up†with private spending. If combined with an increase in other progressive transfers, such a reform could improve efficiency and reduce public spending while benefiting low income populations. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp19-036&r=all |
| By: | Ozili, Peterson K |
| Abstract: | The article examines the impact of the reclassification of IAS 39 on income smoothing using loan loss provisions among European banks. The author predicts that the strict recognition and re-classification requirements of IAS 139 reduced banks' ability to smooth income using bank securities and derivatives, motivating them to rely more on loan loss provisions to smooth income. The findings do not support the prediction for income smoothing through loan loss provisions. Also, there is no evidence for income smoothing in the pre- and post-IAS 39 reclassification period. The implication of the findings is that: (i) European banks did not use loan loss provisions to smooth income during the period examined, and rather rely on other accounting numbers to smooth income; (ii) the IASB’s strict disclosure regulation improved the reliability and informativeness of loan loss provision estimates among European banks during the period of analysis. |
| Keywords: | Earnings Management; Income Smoothing; Loan loss provisions; IFRS, IAS 39; Financial Crises; disclosure regulation; banks; European banks; real earnings management; |
| JEL: | G20 G21 G28 M40 M41 M42 M48 |
| Date: | 2019–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:97035&r=all |
| By: | Alicia H. Munnell; Geoffrey T. Sanzenbacher; Abigail N. Walters |
| Abstract: | Working consistently through oneÕs fifties and early sixties is key to attaining retirement security. However, workers also need access to retirement plans Ð so they can continue to accumulate resources Ð and health insurance Ð so they can avoid withdrawing assets in the event of a health shock. Workers without access to these benefits will likely struggle as they approach retirement, both financially and perhaps emotionally, as they deal with the stress of being unprepared. Yet, despite the fact that a large literature focuses on nontraditional jobs that often lack these benefits, it is unclear how older workers use these jobs and what the consequences are. If some older workers use nontraditional work for much of their late careers, then they likely will end up worse off. If, instead, older workers use nontraditional jobs only temporarily, then it is unlikely that their situation will substantially change. This paper uses the Health and Retirement Study to identify nontraditional jobs and relies on sequence analysis to explore how workers ages 50-62 use them. The results suggest that the majority of nontraditional jobs are used by workers consistently, and that fewer workers use these jobs briefly or as a bridge to retirement. In the end, workers consistently in nontraditional jobs end up with less retirement income than other workers and are more likely to be depressed, even controlling for their financial situation and depression prior to age 50. Given this situation, policymakers may want to consider ways to expand benefits to workers in these jobs to improve their well-being in retirement. |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2019-12&r=all |
| By: | Andrew D. Biggs; Alicia H. Munnell; Anqi Chen |
| Abstract: | For most workers, 401(k)/IRA assets represent the main source of retirement savings outside of Social Security. These accounts can generate significant wealth if workers contribute consistently from a young age, keep their money in their accounts, and minimize their investment fees. However, most workers have 401(k)/IRA balances at retirement that are substantially below their potential. For example, a 25-year-old median earner in 1981 who contributed regularly would have accumulated about $364,000 by age 60, but the typical 60-year-old in 2016 had less than $100,000. The discrepancy is somewhat less if those under 30 and those with defined benefit plans are excluded from the analysis, but still significant. This study uses the Survey of Income and Program Participation, linked with administrative tax records, to explore the reasons for this gap between potential and actual balances and their relative importance. The potential reasons include: the immaturity of the 401(k) system, lack of universal coverage, leakages, and fees. |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:crrwps:wp2019-14&r=all |
| By: | Pauline Rossi (UvA - University of Amsterdam [Amsterdam], Tinbergen Institute - Tinbergen Institute, CEPR - Center for Economic Policy Research - CEPR); Mathilde Godard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The old-age security motive for fertility postulates that people's needs for old-age support raise the demand for children. We test this widespread idea using the extension of social pensions in Namibia during the nineties. The reform eliminated inequalities in pension coverage and benefit across regions and ethnic groups. Combining differences in pre-reform pensions and differences in exposure across cohorts, we show that pensions substantially reduce fertility, especially in late reproductive life. This article provides the first quasi-experimental quantification of the old-age security motive. The results suggest that improving social protection for the elderly could go a long way in fostering fertility decline in Sub-Saharan Africa. |
| Keywords: | Fertility,Old-age pensions,Social security,Africa,Difference-in-differences |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-02378400&r=all |