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on Insurance Economics |
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Issue of 2020‒05‒18
eight papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Karen Clay; Joshua A. Lewis; Edson R. Severnini; Xiao Wang |
| Abstract: | This paper studies how better access to public health insurance affects infant mortality during pandemics. Our analysis combines cross-state variation in mandated eligibility for Medicaid with two influenza pandemics — the 1957-58 "Asian Flu" pandemic and the 1968-69 "Hong Kong Flu" — that arrived shortly before and after the program's introduction. Exploiting heterogeneity in the underlying severity of these two shocks across counties, we find no relationship between Medicaid eligibility and pandemic infant mortality during the 1957-58 outbreak. After Medicaid implementation, we find that better access to insurance in high-eligibility states substantially reduced infant mortality during the 1968-69 pandemic. The reductions in pandemic infant mortality are too large to be attributable solely to new Medicaid recipients, suggesting that the expansion in health insurance coverage mitigated disease transmission among the broader population. |
| JEL: | I13 I18 N32 N52 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27120&r=all |
| By: | Xie, Zoe |
| Abstract: | The COVID-19 pandemic led to an unprecedented expansion in unemployment insurance (UI) eligibility across states. While more than forty states had modified UI rules by the end of March, not all states responded in the same way. In this article, I summarize the changes to state UI rules in response to the crisis and explore factors that have contributed to the variation in states’ responses. |
| Keywords: | COVID-19, Unemployment insurance, Fiscal policy |
| JEL: | H72 J65 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99915&r=all |
| By: | Musgrave, Ralph S. |
| Abstract: | One of the main activities of banks is accepting deposits, lending on most of the money concerned, while telling depositors their money is safe, which it quite clearly is not, because loaned on money is never totally safe. That is fraud: indeed when any other financial institution does that (e.g. a mutual fund or private pension scheme), that activity is classed as fraud. The latter problem can be dealt with via taxpayer backed deposit insurance and billion dollar bail-outs for banks in trouble, but that puts banks in a privileged position relative to other financial institutions, and indeed non-financial institutions and corporations. I.e. taxpayer backed deposit insurance and bailouts amount to a subsidy for banks. Plus taxpayer backing for depositors who want their money loaned out with a view to earning interest flouts a widely accepted principle, namely that it is not normally the job of governments / taxpayers to stand behind commercial activities, and having a bank lend on your money is certainly a commercial activity. The solution is full reserve banking (also known as Sovereign Money), which consists of abandoning deposit insurance and bailouts, and giving depositor / investors the choice between, first, a totally safe method of storing money, which consists simply of having money lodged with government or the central bank, with that money earning little or no interest, and second, an account where money is loaned out, with the result that a higher rate of interest is earned, but depositor / investors carry the risks. |
| Keywords: | banks; fraud; full reserve; fractiona reserve. |
| JEL: | E58 G2 G21 |
| Date: | 2020–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99989&r=all |
| By: | Hambulo Ngoma; Nicole M. Mason-Wardell; Paul C. Samboko; Peter Hangoma |
| Abstract: | Climate-smart agriculture (CSA) is an important component of policy options designed to sustainably increase agricultural productivity, build resilience to climate risks, and mitigate climate change in Sub-Saharan Africa. However, the uptake of common CSA practices such as conservation agriculture remains low and material constraint explanations (e.g., credit, market, labor, information) for this low uptake remain inadequate and unclear. Could behavioral traits or risk preferences play a role? We test the hypothesis that innate behavioral traits such as risk and time preferences play a role in CSA adoption and test whether adoption can be nudged using insurance and green subsidies. To do so, we use a series of incentivized field experiments with 323 randomly selected farmers in Zambia. We first conducted two games with each participant to elicit risk and time preference parameters. We then conducted three adoption games. In the first (base) game, participants decided whether to adopt CSA (conservation agriculture in this case) or conventional agriculture under various payoff scenarios. Returns to CSA and conventional agriculture varied depending on seasonal rainfall, and the realized seasonal rainfall was determined through a lottery (with a 25% chance of good rainfall) after participants had selected their preferred farming option (CSA or conventional agriculture). In the subsequent two games, we changed the payoff structures by augmenting CSA with rainfall insurance and a green subsidy, respectively. The green subsidy is an add-on incentive for farmers that adopt CSA. We compare adoption behavior under the base scenario to the CSA plus insurance scenario and the CSA plus subsidy scenario. We also use the elicited preference parameters from the time and risk preferences games to analyze their role in participants’ adoption decisions. Overall, we find that the majority of participants in our experiments are risk-averse and impatient, and that a larger proportion of women were more risk-averse and impatient than men. Risk aversion and impatience were negatively correlated with the likelihood of adopting CSA. Time and risk preferences were associated with the likelihood of switching adoption between the base and follow- on (augmented) games. For example, an increase in risk aversion increased the likelihood of switching from conservation agriculture in base games to conservation agriculture with insurance in follow-on games. Introducing insurance and green subsidies increased the level of adoption by 10 and 8 percentage points and the probability of adoption by approximately 6 – 12 percentage points. Whether these switch-up levels are high enough is an empirical question, but suggest that insurance and green subsidies are unlikely the panacea. Thus, although monetary returns matter in CSA adoption, non- pecuniary factors such as risk and time preferences also matter. These behavioral traits could partly explain the perceived low adoption of CSA practices such as conservation agriculture. Several factors including uninsured basis risk, trust in and how well farmers understand insurance and subsidy incentives, knowledge of the technology, and subjective perceptions of its riskiness influence adoption choices. Access to extension and subjective risk perceptions were stronger determinants of adoption in real life. Given our findings that more risk-averse individuals are less likely to adopt CSA, a practice that is intended to be risk-reducing, a key policy implication is the need for a retooling of both public and private extension services to better demonstrate and educate farmers on the risk-reducing effects of CSA practices such as conservation agriculture. Moreover, if insurance and subsidies are to be used successfully to nudge adoption, extension will need to educate farmers on the structure of and mechanisms for payouts. This is important to build trust in the incentive systems. |
| Keywords: | Food Security and Poverty, International Development |
| Date: | 2019–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:ags:miffrp:303524&r=all |
| By: | Hambulo Ngoma; Nicole M. Mason-Wardell; Paul C. Samboko; Peter Hangoma |
| Abstract: | Climate-smart agriculture (CSA) is an important component of policy options designed to sustainably increase agricultural productivity, build resilience to climate risks, and mitigate climate change in Sub-Saharan Africa. However, the uptake of common CSA practices such as conservation agriculture remains low and material constraint explanations (e.g., credit, market, labor, information) for this low uptake remain inadequate and unclear. Could behavioral traits or risk preferences play a role? We test the hypothesis that innate behavioral traits such as risk and time preferences play a role in CSA adoption and test whether adoption can be nudged using insurance and green subsidies. To do so, we use a series of incentivized field experiments with 323 randomly selected farmers in Zambia. We first conducted two games with each participant to elicit risk and time preference parameters. We then conducted three adoption games. In the first (base) game, participants decided whether to adopt CSA (conservation agriculture in this case) or conventional agriculture under various payoff scenarios. Returns to CSA and conventional agriculture varied depending on seasonal rainfall, and the realized seasonal rainfall was determined through a lottery (with a 25% chance of good rainfall) after participants had selected their preferred farming option (CSA or conventional agriculture). In the subsequent two games, we changed the payoff structures by augmenting CSA with rainfall insurance and a green subsidy, respectively. The green subsidy is an add-on incentive for farmers that adopt CSA. We compare adoption behavior under the base scenario to the CSA plus insurance scenario and the CSA plus subsidy scenario. We also use the elicited preference parameters from the time and risk preferences games to analyze their role in participants’ adoption decisions. Overall, we find that the majority of participants in our experiments are risk-averse and impatient, and that a larger proportion of women were more risk-averse and impatient than men. Risk aversion and impatience were negatively correlated with the likelihood of adopting CSA. Time and risk preferences were associated with the likelihood of switching adoption between the base and follow-on (augmented) games. For example, an increase in risk aversion increased the likelihood of switching from conservation agriculture in base games to conservation agriculture with insurance in follow-on games. Introducing insurance and green subsidies increased the level of adoption by 10 and 8 percentage points and the probability of adoption by approximately 6 – 12 percentage points. Whether these switch-up levels are high enough is an empirical question, but suggest that insurance and green subsidies are unlikely the panacea. Thus, although monetary returns matter in CSA adoption, non- pecuniary factors such as risk and time preferences also matter. These behavioral traits could partly explain the perceived low adoption of CSA practices such as conservation agriculture. Several factors including uninsured basis risk, trust in and how well farmers understand insurance and subsidy incentives, knowledge of the technology, and subjective perceptions of its riskiness influence adoption choices. Access to extension and subjective risk perceptions were stronger determinants of adoption in real life. Given our findings that more risk-averse individuals are less likely to adopt CSA, a practice that is intended to be risk-reducing, a key policy implication is the need for a retooling of both public and private extension services to better demonstrate and educate farmers on the risk-reducing effects of CSA practices such as conservation agriculture. Moreover, if insurance and subsidies are to be used successfully to nudge adoption, extension will need to educate farmers on the structure of and mechanisms for payouts. This is important to build trust in the incentive systems. |
| Keywords: | Food Security and Poverty, International Development |
| Date: | 2019–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:miffrp:303060&r=all |
| By: | Francesca Carapella; Cyril Monnet |
| Abstract: | We develop a parsimonious model to study the effect of regulations aimed at reducing counterparty risk on the structure of over-the-counter securities markets. We find that such regulations promote entry of dealers, thus fostering competition and lowering spreads. Greater competition, however, has an indirect negative effect on market-making profitability. General equilibrium effects imply that more competition can distort incentives of all dealers to invest in efficient technologies ex ante, and so can cause a social welfare loss. Our results are consistent with empirical findings on the effects of post-crisis regulations and with the opposition of some market participants to those regulations. |
| Keywords: | liquidity, dealers, insurance, central counterparties |
| JEL: | G11 G23 G28 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:861&r=all |
| By: | Senia Nhamo; Edinah Mudimu |
| Abstract: | The recent National Health Insurance White Paper proposes redirection of medical tax credits revenue towards the financing of the national health insurance. This raises critical questions about the impact on affordability for the poor as well as fundamental legal implications. The 2012 tax reforms which saw the move from deductions to credits were justified on the basis of equitable income redistribution. This paper examines the redistributive effects of the medical tax credit system. |
| Keywords: | medical tax credit, medical expenses, tax deductions, distributional impacts, Inequality, tax progressivity, South Africa |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-30&r=all |
| By: | Traczynski, Jeffrey (Federal Deposit Insurance Corporation) |
| Abstract: | This paper explores the willingness of entrepreneurs to pay for wealth insurance to protect personal assets in case of business failure and the impact of this strategy on small business operation decisions. I show that antidiscrimination laws allow married firm owners in half of U.S. states to choose between asset protection and having more collateral for business funding, allowing entrepreneurs to reveal their valuation for preserving personal assets at time of failure. I find that firm owners value asset protection offered by tenancy by the entirety laws at $900-$1000 per year. Firms receive smaller loans when entrepreneurs use this form of ownership to reduce the personal costs of firm failure, but show no differences in hiring patterns or spending on risky projects. This strategy of preparation in case of failure appears to affect small businesses through the funding channel. |
| Keywords: | personal bankruptcy, tenancy by the entirety, revealed preference, entrepreneurship |
| JEL: | K35 K36 L26 M13 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13173&r=all |