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on Insurance Economics |
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Issue of 2020‒06‒22
seven papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Alexander Ahammer; Analisa Packham (Economics Department at Vanderbilt University) |
| Abstract: | Using administrative data for Upper Austrian workers from 2003–2013, we show that an extension in unemployment insurance (UI) duration increases unemployment length and impacts worker physical and mental health. These effects vary by gender. Specifically, we find that women eligible for an additional 9 weeks of UI benefits fill fewer opioid and antidepressant prescriptions and experience a lower likelihood of filing a disability claim, as compared to non-eligible unemployed women. Moreover, estimates indicate within-household spillovers for young children. For men, we find that extending UI benefit duration increases the likelihood of a cardiac event and eventual disability retirement filing. |
| Keywords: | I38, I18, J18 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2020-08&r=all |
| By: | Palacios, Robert (World Bank); Robalino, David A. (World Bank) |
| Abstract: | Given the prevalence of informal labor, most countries have combined contributory social insurance programs (pensions, unemployment benefits, and health insurance), with non-contributory insurance programs and several types of "safety nets." All of these programs involve different types of subsidies and taxes, sometimes implicit. Because of design problems and the lack of coordination/integration between programs, these subsidies/taxes tend to cause four problems: 1) they can reduce incentives to contribute to mandatory insurance programs and to create formal jobs; 2) they can be regressive since redistribution often benefits middle/high income workers more than low income workers 3) they do not provide continuous protection as workers change occupations and constrain rather than facilitate, labor mobility; and 4) coverage tends to exclude many informal sector workers in the middle of the income distribution. As such, existing programs are not well prepared to deal with a world of labor characterized by persistent low productivity jobs, more frequent labor market transitions including across sectors and geographic regions and higher equilibrium unemployment rates for some groups of workers. This paper develops a policy framework to integrate, in a transparent way, the insurance function (actuarially-fair risk pooling or savings) and the redistributive function (transfers) of the social protection system in order to expand coverage, improve equity, and reduce labor market distortions. We illustrate this type of integration with the case of old-age pensions which is typically the most important intervention, at least from a fiscal perspective. |
| Keywords: | social insurance, social assistance, universal basic income, jobs, pensions, future of work, COVID-19 |
| JEL: | H24 J26 J46 J65 J32 I13 H53 H55 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13258&r=all |
| By: | Asger Lau Andersen (CEBI, Department of Economics, University of Copenhagen); Niels Johannesen (CEBI, Department of Economics, University of Copenhagen); Adam Sheridan (CEBI, Department of Economics, University of Copenhagen) |
| Abstract: | We combine transaction-level data from the largest retail bank in Denmark and individual-level data from government registers to study informal insurance within social networks. Accounting for transfers in cash (money transfers) and in kind (cohabitation), we estimate that family and friends jointly replace around 7 cents of the marginal dollar lost within the bottom income decile, but much less at higher income levels. We document that informal insurance covers other adverse events than income losses: expenditure shocks, family ruptures and financial distress. Parents appear to be the key providers of informal insurance with a small amount of insurance coming from siblings and virtually none from grandparents and friends. Replacement rates vary monotonically with parent economic resources. |
| Keywords: | informal insurance, altruism, private transfers, risk sharing |
| JEL: | D1 D6 |
| Date: | 2020–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2019&r=all |
| By: | Gathmann, Christina; Huttunen, Kristiina; Jernström, Laura; Sääksvuori, Lauri; Stitzing, Robin |
| Abstract: | We study how a negative labor market shock like job loss generates health spillovers in couples. Using administrative data of all workers and firms matched to mortality and patient records, we document that male job displacement increases the mortality risk for both the man and his partner. For every 10,000 displaced men, there are 27 additional deaths over a 5-year period rising to 115 additional deaths over two decades. Of those, 60% accrue to the displaced worker but 40% are due to excess spousal mortality. Deaths from cardiovascular diseases jump up and hospitalization records show more treatments for alcohol-related disorders and mental health issues. We also find a stunning gender asymmetry: while male job displacement generates large and persistent health effects, no such dire health consequences are observed after a woman loses her job. We explore three explanations for the observed health spillovers: risk sharing through spousal labor supply; earnings losses and the role of public insurance; and the influence of gender roles and family structure. |
| Keywords: | job displacement, mortality, spillovers, added worker, public insurance, gender roles, Local public finance and provision of public services, I14, J21, J63, J12, D13, |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:fer:wpaper:133&r=all |
| By: | Philippe Artzner; Karl-Theodor Eisele; Thorsten Schmidt |
| Abstract: | This paper is an attempt to study fundamentally the valuation of insurance contracts. We start from the observation that insurance contracts are inherently linked to financial markets, be it via interest rates, or -- as in hybrid products, equity-linked life insurance and variable annuities -- directly to stocks or indices. By defining portfolio strategies on an insurance portfolio and combining them with financial trading strategies we arrive at the notion of insurance-finance arbitrage (IFA). A fundamental theorem provides two sufficient conditions for presence or absence of IFA, respectively. For the first one it utilizes the conditional law of large numbers and risk-neutral valuation. As a key result we obtain a simple valuation rule, called QP-rule, which is market consistent and excludes IFA. Utilizing the theory of enlargements of filtrations we construct a tractable framework for general valuation results, working under weak assumptions. The generality of the approach allows to incorporate many important aspects, like mortality risk or dependence of mortality and stock markets which is of utmost importance in the recent corona crisis. For practical applications, we provide an affine formulation which leads to explicit valuation formulas for a large class of hybrid products. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2005.11022&r=all |
| By: | Svetlana Pashchenko (University of Georgia); Ponpoje Porapakkarm (National Graduate Institute for Policy Studies) |
| Abstract: | How does the value of life affect annuity demand? To address this question, we construct a portfolio choice problem with three key features: i) agents have access to life-contingent assets, ii) they always prefer living to dying, iii) agents have non-expected utility preferences. We show that as utility from being alive increases, annuity demand decreases (increases) if agents are more (less) averse to risk rather than to intertemporal fluctuations. Put differently, if people prefer early resolution of uncertainty, they are less interested in annuities when the value of life is high. Our findings have two important implications. First, we get a better understanding of the well-known annuity puzzle. Second, we argue that the observed low annuity demand provides evidence that people prefer early rather than late resolution of uncertainty. |
| Keywords: | annuities, value of a statistical life, portfolio choice problem, life-contingent assets, longevity insurance |
| JEL: | D91 G11 G22 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2020-042&r=all |
| By: | Victor Amoureux (Institut national de la statistique et des études économiques (INSEE)); Elvire Guillaud (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, LIEPP - Laboratoire interdisciplinaire d'évaluation des politiques publiques [Sciences Po] - Sciences Po - Sciences Po); Michaël Zemmour (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, LIEPP - Laboratoire interdisciplinaire d'évaluation des politiques publiques [Sciences Po] - Sciences Po - Sciences Po) |
| Abstract: | The literature on tax systems generally considers each type of tax in a self-contained way, with its own distributive characteristics. While the income tax is considered as a progressive tax, social insurance contributions are seen as being regressive, namely because of ceilings. Using a database of comparative micro-data at the household level (LIS data, 22 OECD countries, 1999-2016 period), supplemented with OECD data on employer contributions, we measure effective tax rates over the entire income distribution. Our results jeopardize the conventional economic wisdom on the role of income and payroll taxes in tax progressivity, and on their respective impact on inequality reduction. We show that, in all countries of our sample, the progressivity of income tax increases as soon as the progressivity of social insurance contributions decreases. This implies that income and payroll tax schedules are not independent. Even more, they act in a complementary way. While payroll tax heavily compress inequalities at the bottom of the income distribution, income tax reduces inequalities at the top. |
| Keywords: | income tax,social insurance contributions,inequality reduction,progressivity |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-02735278&r=all |