nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒07‒13
29 papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Dying to Work: Effects of Unemployment Insurance on Health By Alexander Ahammer; Analisa Packham
  2. Public-Private Partnership in the Management of Natural Disasters: A Review By Selene Perazzini
  3. Application and Award Responses to Stricter Screening in Disability Insurance By Mathilde Godard; Pierre Koning; Maarten Lindeboom
  4. Loan Insurance, Market Liquidity, and Lending Standards By Ahnert, Toni; Kuncl, Martin
  5. On the role of probability weighting on WTP for crop insurance with and without yield skewness By Douadia Bougherara; Laurent Piet
  6. A Public-Private Insurance Model for Natural Risk Management: an Application to Seismic and Flood Risks on Residential Buildings in Italy By Selene Perazzini; Giorgio Stefano Gnecco; Fabio Pammolli
  7. US Unemployment Insurance Replacement Rates During the Pandemic By Peter Ganong; Pascal J. Noel; Joseph S. Vavra
  8. Preferences of a new health care profession. A pilot study with anaesthesia technologist trainees in Germany By Katharina Saunders; Christian Hagist; Alistair McGuire; Christian Schlereth
  9. Building Better Retirement Systems in the Wake of the Global Pandemic By Olivia S. Mitchell
  10. Unemployment insurance, Recalls and Experience Rating By Julien Albertini; Xavier Fairise; Anthony Terriau
  11. Diagnostic Uncertainty and Insurance in Credence Goods Markets By Loukas Balafoutas; Helena Fornwagner; Rudolf Kerschbamer; Matthias Sutter; Maryna Tverdostup
  12. Lecture d'une évolution de la complémentaire santé des Fonctionnaires By Florian Beaucreux
  13. Building resilience and adaptation to climate change in Malawi: Quantitative baseline report By Duchoslav, Jan; Kenamu, Edwin; Gilbert, Rachel; Baulch, Bob; Palloni, Giordano; Gilligan, Daniel O.
  14. On the Optimal "Lockdown" During an Epidemic By Gonzalez-Eiras, Martin; Niepelt, Dirk
  15. In Sickness and in Health: Job Displacement and Health Spillovers in Couples By Gathmann, Christina; Huttunen, Kristiina; Jernström, Laura; Sääksvuori, Lauri; Stitzing, Robin
  16. Snapshot of Households That Received the Canada Emergency Response Benefit and Paths for Further Investigation By Bertrand Achou; David Boisclair; Philippe d'Astous; Raquel Fonseca; Franca Glenzer; Pierre-Carl Michaud
  17. Resolution Funding; Who Pays When Financial Institutions Fail? By Oana M Croitoru; Marc C Dobler; Johan Molin
  18. Ageing-Driven Migration and Redistribution: Comparing Policy Regimes By Razin, Assaf; Schwemmer, Alexander
  19. If Sick-Leave becomes More Costly, Will I go back to Work? Could it be too soon? By Olivier Marie; Judit Vall Castello
  20. Did the UK policy response to Covid-19 protect household incomes? By Brewer, Mike; Tasseva, Iva Valentinova
  21. Higher-Order Income Risk over the Business Cycle By Busch, Christopher; Ludwig, Alexander
  22. Household Finance By Gomes, Francisco J; Haliassos, Michael; Ramadorai, Tarun
  23. Need, unmet need, and shortage in the long-term care market By Paula Cristina Albuquerque
  24. Impact of Covid 19 on Mental Health: Whether India is prepared to handle the crisis? By Sahoo, Harihar; Biswal, R.K.
  25. It Takes Two to Tango Income and Payroll Taxes in Progressive Tax Systems By Victor Amoureux; Elvire Guillaud; Michaël Zemmour
  26. The Effect of Job Loss and Unemployment Insurance on Crime in Brazil By Diogo Britto; Paolo Pinotti; Breno Sampaio
  27. Impact of proportional transaction costs on systematically generated portfolios By Ruf, Johannes; Xie, Kangjianan
  28. Semesters or Quarters? The Effect of the Academic Calendar on Postsecondary Student Outcomes By Valerie Bostwick; Stefanie Fischer; Matthew Lang
  29. A New Approach to Quantifying, Reducing and Insuring Cyber Risk: Preliminary Analysis and Proposal for Further Research By Bublil, Shalom; Gandal, Neil; Riordan, Michael

  1. By: Alexander Ahammer; Analisa Packham
    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.
    JEL: I18 I38 J18 J65
    Date: 2020–05
  2. By: Selene Perazzini
    Abstract: Natural hazards can considerably impact the overall society of a country. As some degree of public sector involvement is always necessary to deal with the consequences of natural disasters, central governments have increasingly invested in proactive risk management planning. In order to empower and involve the whole society, some countries have established public-private partnerships, mainly with the insurance industry, with satisfactorily outcomes. Although they have proven necessary and most often effective, the public-private initiatives have often incurred high debts or have failed to achieved the desired risk reduction objectives. We review the role of these partnerships in the management of natural risks, with particular attention to the insurance sector. Among other country-specific issues, poor risk knowledge and weak governance have widely challenged the initiatives during the recent years, while the future is threatened by the uncertainty of climate change and unsustainable development. In order to strengthen the country's resilience, a greater involvement of all segments of the community, especially the weakest layers, is needed and the management of natural risks should be included in a sustainable development plan.
    Date: 2020–06
  3. By: Mathilde Godard (University of Lyon, CNRS, GATE UMR 5824, F-69130 Ecully, France); Pierre Koning (Leiden University, Vrije Universiteit, Amsterdam, IZA and Tinbergen Institute); Maarten Lindeboom (Vrije Universiteit, Amsterdam, Tinbergen Institute, Centre for Health Economics, Monash University, IZA)
    Abstract: We examine the targeting effects of stricter screening in the Dutch Disability Insurance (DI) program induced by a major nationwide reform. The drastic 2003 “Gatekeeper Protocol” raised DI application costs and revealed more information about individual true ability to work. Discontinuity-in-Time regressions on administrative data show substantial declines in DI application rates (a 40% decrease in one year), with the largest decline occurring in difficult-todiagnose impairments and less severe health disorders. This resulted in a more deserving pool of applicants. At the same time, those who stopped applying had worse health, worked less, and were more likely to be on UI and social assistance than workers who did not apply in the old system. There are no additional targeting gains at the point of the award decision, implying that changes in average health conditions of awardees were fully driven by self-screening and work resumption in the DI waiting period.
    Keywords: Disability Insurance, Screening, Targeting efficiency
    JEL: H2 I3
    Date: 2020
  4. By: Ahnert, Toni; Kuncl, Martin
    Abstract: We examine loan insurance when lenders can screen at origination, learn loan quality over time, and can sell loans in secondary markets. Loan insurance reduces lending standards but improves market liquidity. Lenders with worse screening ability insure, which commits them to not exploiting future private information about loan quality and improves the quality of uninsured loans traded. This externality implies insufficient insurance. A regulator achieves constrained efficiency by (i) guaranteeing a minimum price of uninsured loans to eliminate a welfare-dominated illiquid equilibrium; and (ii) subsidizing loan insurance in the liquid equilibrium. Our results can inform the design of government-sponsored mortgage guarantees.
    Keywords: Adverse Selection; Loan insurance; market liquidity; screening
    JEL: G01 G21 G28
    Date: 2020–03
  5. By: Douadia Bougherara (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Laurent Piet (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: A growing number of studies in finance and economics seek to explain insurance choices using the assumptions advanced by behavioral economics. One recent example in agricultural economics is the use of cumulative prospect theory (CPT) to explain farmer choices regarding crop insurance coverage levels (Babcock, 2015). We build upon this framework by deriving willingness to pay (WTP) for insurance programs under alternative assumptions, thus extending the model to incorporate farmer decisions regarding whether or not to purchase insurance. Our contribution is twofold. First, we study the sensitivity of farmer WTP for crop insurance to the inclusion of CPT parameters. We find that loss aversion and probability distortion increase WTP for insurance while risk aversion decreases it. Probability distortion in losses plays a particularly important role. Second, we study the impact of yield distribution skewness on farmer WTP assuming CPT preferences. We find that WTP decreases when the distribution of yields moves from negatively- to positively-skewed and that the combined effect of probability weighting in losses and skewness has a large negative impact on farmer WTP for crop insurance.
    Keywords: Crop Insurance,Cumulative Prospect Theory,premium subsidy,skewness
    Date: 2020–06–05
  6. By: Selene Perazzini; Giorgio Stefano Gnecco; Fabio Pammolli
    Abstract: This paper proposes a public-private insurance scheme for earthquakes and floods in Italy in which property-owners, the insurer and the government co-operate in risk financing. Our model departs from the existing literature by describing a public-private insurance intended to relieve the financial burden that natural events place on governments, while at the same time assisting individuals and protecting the insurance business. Hence, the business is aiming at maximizing social welfare rather than profits. Given the limited amount of data available on natural risks, expected losses per individual have been estimated through risk-modeling. In order to evaluate the insurer's loss profile, spatial correlation among insured assets has been evaluated by means of the Hoeffding bound for r-dependent random variables. Though earthquakes generate expected losses that are almost six times greater than floods, we found that the amount of public funds needed to manage the two perils is almost the same. We argue that this result is determined by a combination of the risk aversion of individuals and the shape of the loss distribution. Lastly, since earthquakes and floods are uncorrelated, we tested whether jointly managing the two perils can counteract the negative impact of spatial correlation. Some benefit from risk diversification emerged, though the probability of the government having to inject further capital might be considerable. Our findings suggest that, when not supported by the government, private insurance might either financially over-expose the insurer or set premiums so high that individuals would fail to purchase policies.
    Date: 2020–06
  7. By: Peter Ganong; Pascal J. Noel; Joseph S. Vavra
    Abstract: We use micro data on earnings together with the details of each state’s UI system under the CARES Act to compute the entire distribution of current UI benefits. The median replacement rate is 134%. Two-thirds of UI eligible workers can receive benefits which exceed lost earnings and one-fifth can receive benefits at least double lost earnings. There is sizable variation in the effects of the CARES Act across occupations and states, with important distributional consequences. We show how alternative UI expansion policies would change the distribution of UI benefits and thus affect resulting liquidity provision, progressivity, and labor supply incentives.
    JEL: E24 J65
    Date: 2020–05
  8. By: Katharina Saunders; Christian Hagist; Alistair McGuire; Christian Schlereth
    Abstract: The profession of anaesthesia technologist is a relatively new profession in Germany. The German hospital Association published the first training guideline in 2011. Likewise the surgical technologist profession, the profession of anaesthesia technologists are not officially certified. Hence, similar disadvantages such as further career restrictions and uncertainties in case of unemployment exist. Even the hospitals need to cover the full training expenses. The training of an anaesthesia technologist lasts three years, containing of practical work experience within the anaesthesia units such as the post-anaesthesia caring unit and a theoretical education. The action site is limited to the anaesthesia units only. An anaesthesia technologist is an assistant to the doctor and takes care of the patient before, during and after the anaesthesia. Since the anaesthesia technologist profession is a very young profession group, little is known about the preferences of this group. However, hospital manager need to understand the individual preferences to be able to provide a target group tailored recruitment. The motivation was to provide results to inform the human resource management of hospitals about the preferences of the very young profession group of anaesthesia technologist with respect to contribute to a successful development of this professi on in order to cope with the current labour shortage crisis.
    Keywords: DCE, labour shortage, specialised health care profession, job preferences
    JEL: I18 J08 J30 C93 C90
    Date: 2020–01–24
  9. By: Olivia S. Mitchell
    Abstract: In the wake of the global pandemic known as COVID-19, retirees, along with those hoping to retire someday, have been shocked into a new awareness of the need for better risk management tools to handle longevity and aging. This paper offers an assessment of the status quo prior to the spread of the coronavirus, evaluates how retirement systems are faring in the wake of the shock. Next we examine insurance and financial market products that may render retirement systems more resilient for the world’s aging population. Finally, potential roles for policymakers are evaluated.
    JEL: G23 H55 J26 J32
    Date: 2020–05
  10. By: Julien Albertini (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Xavier Fairise (GAINS, University of Le Mans); Anthony Terriau (GAINS, University of Le Mans)
    Abstract: In the US, almost half of unemployment spells end through recall. In this paper, we show that the probability of being recalled is much higher among unemployment benefit recipients than nonrecipients. We argue that a large part of the observed difference in recall shares is accounted for by the design of the unemployment insurance financing scheme characterized by an experience rating system. We develop a search and matching model with different unemployment insurance status, endogenous separations, recalls and new hires. We quantify what would have been the labor market under alternative financing scheme. In the absence of the experience rating, the hiring and separations would have been higher in the long run and more volatile. Experience rating system contributes significantly to the difference in recalls between the recipients and the nonrecipients.
    Keywords: Search and matching, Layoffs, Recalls, Experience rating, Unemployment insurance
    JEL: E23 E32 J63 J64 J65
    Date: 2020
  11. By: Loukas Balafoutas; Helena Fornwagner; Rudolf Kerschbamer; Matthias Sutter; Maryna Tverdostup
    Abstract: Credence goods markets - like health care or repair services - with their informational asymmetries between expert sellers and uninformed customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. Only little is known so far about how diagnostic uncertainty of sellers affects market outcomes, and how one widespread feature of such markets, insurance on the customer side, interacts with the degree of diagnostic uncertainty. We present a model that analyzes the effects of both diagnostic uncertainty and insurance in a unified framework and we test the model's predictions in lab experiments. Both in theory and in the experiment diagnostic uncertainty increases the rate of incorrect service provision and leads to less trade, thus reducing efficiency. In theory, insurance also increases the provision of incorrect services, but at the same time it also increases the volume of trade leading to an ambiguous net effect on welfare. In the experiments the net effect of insurance coverage on efficiency turns out to be negative. We also find an important interaction effect: if consumers are insured, experts invest less in diagnostic precision.
    Keywords: Credence goods, experiment, diagnostic uncertainty, insurance coverage, welfare
    JEL: C91 C72 D82 G22
    Date: 2020
  12. By: Florian Beaucreux (REGARDS - Recherches en Économie Gestion AgroRessources Durabilité Santé- EA 6292 - URCA - Université de Reims Champagne-Ardenne)
    Abstract: The article offers a reading of the model of mutual insurance companies for civil servants in order to understand the issues at stake in the current reshaping of the complementary health insurance market. The author draws on the history of social protection for civil servants and the materialization of the associated values through the coupling of compulsory and complementary health insurance schemes to show the evolution of individual rationality. The author thus analyses the new framework of participation of the public employer in the prism of this evolution in order to highlight the paradox existing between the intention of its mechanisms and the effects on the role of the individual in the construction of his complementary social protection.
    Abstract: L'article offre une lecture du modèle des mutuelles de fonctionnaires afin de comprendre les enjeux de la recomposition actuelle du marché de l'assurance maladie complémentaire. L'auteur s'appuie sur l'histoire de la protection sociale des fonctionnaires et la matérialisation des valeurs associées à travers le couplage des régimes obligatoires et complémentaires d'assurance maladie pour montrer l'évolution de la rationalité individuelle. L'auteur analyse ainsi le nouveau cadre de participation de l'employeur public au prisme de cette évolution pour mettre en avant le paradoxe existant entre l'intention de ses mécanismes et les effets sur le rôle de l'individu dans la construction de sa protection sociale complémentaire.
    Keywords: Mutuelle,Cotisations,Assurance maladie complémentaire,Valeurs,Solidarité
    Date: 2020–04
  13. By: Duchoslav, Jan; Kenamu, Edwin; Gilbert, Rachel; Baulch, Bob; Palloni, Giordano; Gilligan, Daniel O.
    Abstract: Building Resilience and Adaptation to Climate Change (BRACC) is a five year program whose main objective is to strengthen the resilience of poor and vulnerable households to withstand current and future weather and climate-related shocks and stresses in four districts in Southern Malawi: Balaka, Chikwawa, Mangochi and Phalombe. Resilience is operationalized as the ability of households to smooth consumption in response to shocks and stresses. This baseline report introduces the evaluation context and describes the BRACC program, details the evaluation design, summarizes main findings from the baseline household survey, and tests whether the randomizations successfully balanced baseline observable characteristics across the treatment arms.
    Keywords: MALAWI, SOUTHERN AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, resilience, climate change, climate-smart agriculture, data collection, surveys, households, food security, insurance, agricultural production, nutrition, poverty, quantitative analysis, weather index insurance, Building Resilience and Adaptation to Climate Change (BRACC), impact evaluation, economic welfare, quantitative evaluation
    Date: 2020
  14. By: Gonzalez-Eiras, Martin; Niepelt, Dirk
    Abstract: We embed a lockdown choice in a simplified epidemiological model and derive formulas for the optimal lockdown intensity and duration. The optimal policy reflects the rate of time preference, epidemiological factors, the hazard rate of vaccine discovery, learning effects in the health care sector, and the severity of output losses due to a lockdown. In our baseline specification a Covid-19 shock as currently experienced by the US optimally triggers a reduction in economic activity by two thirds, for about 50 days, or approximately 9.5 percent of annual GDP.
    Keywords: COVID-19; Epidemic; Health care system; lockdown; logistic model; Pandemic; Production shortfall; SIR model; social distancing
    JEL: I18
    Date: 2020–04
  15. By: Gathmann, Christina (Heidelberg University); Huttunen, Kristiina (VATT, Helsinki); Jernström, Laura (University of Helsinki); Sääksvuori, Lauri (University of Turku); Stitzing, Robin (Aalto University)
    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
    JEL: I14 J21 J63 J12 D13
    Date: 2020–06
  16. By: Bertrand Achou; David Boisclair; Philippe d'Astous; Raquel Fonseca; Franca Glenzer; Pierre-Carl Michaud
    Abstract: Series: Survey of Household Finances in a Time of Pandemic – Part 2 At the beginning of the pandemic many households hit a wall. In Quebec, over 21 per cent of them experienced job loss.[1] To deal with this situation the Government of Canada reacted rapidly by setting up an emergency fund (the Canada Emergency Response Benefit) that had to be delivered on very short notice. We learned from conversations with government sources that the employment insurance program would have been unable to handle this volume of demand in such a short time. Targeted tax measures would have been difficult to implement because, with few exceptions, the tax system is based on an information cycle that is annual, not monthly or even weekly. It would have been challenging to implement more complicated income- or asset-based criteria including claw-back provisions, etc. This gave rise to a program that issued cheques to over eight million Canadians who applied under very flexible conditions. As we enter the recovery phase we perceive a need to better understand the impact this assistance has had on households. To that end, we have chosen to sketch an overview of CERB recipient households by incorporating several questions to into the Survey of Household Finances in a Time of Pandemic, jointly conducted by the Retirement and Savings Institute, the Research Chair in Intergenerational Economics, and CIRANO. [1] For an overview of the impacts of the pandemic on personal finances, the reader is encouraged to consult the first of our series of Notes on the survey: 25.
    Keywords: COVID-19,
    Date: 2020–06–04
  17. By: Oana M Croitoru; Marc C Dobler; Johan Molin
    Abstract: A key element of the international reform agenda since the Global Financial Crisis has been to strengthen resolution regimes and make government bailouts the last, not first, resort. A new international standard prescribes a range of tools, powers, and funding arrangements needed to resolve “any financial institution that could be systemically significant or critical if it fails.” It recommends having resolution funding arrangements set up in advance, “so that authorities are not constrained to rely on public ownership or bail-out funds as a means of resolving firms.” It leaves open significant flexibility with respect to the arrangements that would provide the resources authorities will need to carry out effective resolution. This paper offers a framework for weighing the relative advantages of different resolution funding options that could meet the standard. It presents the main developments to date and discusses the advantages and disadvantages of different options.
    Keywords: Bank resolution;Central banks and their policies;Deposit insurance;Bank bailouts;Financial crises;Systemically important financial institutions;Crisis resolution;resolution, resolution funds, systemic financial institutions, deposit insurance funds, financial crisis
    Date: 2018–08–16
  18. By: Razin, Assaf; Schwemmer, Alexander
    Abstract: Life cycle and insurance-type considerations dominate redistribution policy. Wage and fiscal burden implication dominate migration policy Ageing drive both migration and redistribution trends Fiscal prospects of ageing depend on two factors, in order to mitigate adverse macroeconomic impact of ageing. The first is the tendency towards for capital deepening; the second increased migration flows. In a macroeconomic framework the paper compares different policy regimes, directed at migration and redistribution issues: migration quotas, provision of social benefits, labor income and capital income taxation, - are all endogenously determined in a policy-optimizing framework. The analysis makes a three-way comparison: free-migration regime differentiated from restricted-migration regime, welfare-state regime distinguished from free-market regime, and low-income-majority regime assessed against high-income-majority regime.
    Date: 2020–04
  19. By: Olivier Marie (Erasmus University Rotterdam); Judit Vall Castello (University of Barcelona)
    Abstract: We investigate the impact on work absence of a massive reduction in paid sick leave benefits. We exploit a policy change that only affected public sector workers in Spain and compare changes in the number and length of spells they take relative to unaffected private sector workers. Our results highlight a large drop in frequency mostly offset by increases in average duration. Overall, the policy did reduce number of days lost to sick leave. For some, however, return to work may have been premature as we document huge increases in both the proportion of relapses and working accidents rates.
    Keywords: Sickness Insurance, Paid Sick Leave, Absenteeism, Presenteeism, Relapses Contagious Diseases, Benefit Displacement, Working Accidents, Negative Externalities, Spain
    JEL: J32 I12 I13 I18 J22 J28
    Date: 2020–06–20
  20. By: Brewer, Mike; Tasseva, Iva Valentinova
    Abstract: We analyse the UK policy response to Covid-19 and its impact on household incomes, as of late April 2020, using microsimulation methods. We estimate that households will lose a substantial share of their net income (8% on average). The proportional losses are largest for higher-income families. However, the overall impact of the crisis on income inequality is small. Earnings subsidies (Coronavirus Job Retention Scheme) will protect household finances and provide the main insurance mechanism during the crisis. Besides subsidies, Covid-related benefit increases and tax-benefit automatic stabilisers will play an important role in mitigating the shocks, underlining the importance of tax-benefit design in protecting household incomes during economic downturns. Analysing how a near-decade of austerity has affected the UK safety net, we find that, even after the extra benefit spending, the ability of the 2020 system to provide insurance against the shocks would be similar to the 2011 pre-austerity system.
    Date: 2020–06–18
  21. By: Busch, Christopher; Ludwig, Alexander
    Abstract: We extend the canonical income process with persistent and transitory risk to shock distributions with left-skewness and excess kurtosis, to which we refer as higher- order risk. We estimate our extended income process by GMM for household data from the United States. We find countercyclical variance and procyclical skewness of persistent shocks. All shock distributions are highly leptokurtic. The existing tax and transfer system reduces dispersion and left-skewness of shocks. We then show that in a standard incomplete-markets life-cycle model, first, higher-order risk has sizable welfare implications, which depend crucially on risk attitudes of households; second, higher-order risk matters quantitatively for the welfare costs of cyclical idiosyncratic risk; third, higher-order risk has non-trivial implications for the degree of self-insurance against both transitory and persistent shocks.
    Keywords: Business cycle; GMM estimation; labor income risk; Life-Cycle Model; Persistent and Transitory Income Shocks; Risk attitudes; Skewness
    JEL: D31 E24 E32 H31 J31
    Date: 2020–03
  22. By: Gomes, Francisco J; Haliassos, Michael; Ramadorai, Tarun
    Abstract: Household financial decisions are complex, interdependent, and heterogeneous, and central to the functioning of the financial system. We present an overview of the rapidly expanding literature on household finance (with some important exceptions) and suggest directions for future research. We begin with the theory and empirics of asset market participation and asset allocation over the lifecycle. We then discuss household choices in insurance markets, trading behavior, decisions on retirement saving, and financial choices by retirees. We survey research on liabilities, including mortgage choice, refinancing, and default, and household behavior in unsecured credit markets, including credit cards and payday lending. We then connect the household to its social environment, including peer effects, cultural and hereditary factors, intra-household financial decision making, financial literacy, cognition and educational interventions. We also discuss literature on the provision and consumption of financial advice.
    Keywords: household finance
    Date: 2020–03
  23. By: Paula Cristina Albuquerque
    Date: 2020–01
  24. By: Sahoo, Harihar; Biswal, R.K.
    Abstract: The COVID-19 is clearly having a major impact on mental health by affecting our day to day functioning with increasing unemployment, separating families and various other changes. There is a worldwide fear, depression and panic because of this pandemic. The frequently updating of the worst case scenarios by the media can fuel fear and worry. The uncertainty and Isolation can lead to difficulty in sleeping or concentrating. Therefore, the objective of this study is to address the several issues related to mental health because of COVID-19 pandemic. Besides, it also identifies high risk populations of adverse mental health outcomes. Finally, we discuss whether India, the second-largest populous country in the world and enormous cultural diversity, is prepared to face the challenges that may arise in future. The study concludes by stating that, there is a need for real-time monitoring of mental health issues, across the population at-risk groups and also the frontline workers including healthcare professionals. Marginalized sections of the society including the elderly, undocumented migrants, homeless persons and those with mental illness should be given priority and extra effort should be made to obstruct from their deteriorated mental health conditions due to this pandemic.
    Keywords: Covid 19; Mental Health; Depression; Anxiety; India.
    JEL: I18
    Date: 2020–05–24
  25. 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
  26. By: Diogo Britto; Paolo Pinotti; Breno Sampaio
    Abstract: We investigate the effect of job loss and unemployment benefits on criminal behavior, exploiting individual-level data on the universe of workers and criminal cases in Brazil over the 2009-2017 period. We match workers displaced upon plausibly exogenous mass layouts with observationally-equivalent control groups to identify dynamic treatment effects of job loss while allowing for treatment effect heterogeneity. In our preferred specification, the probability of criminal prosecution increases by 23% upon job loss and remains approximately constant during the following years. Our unusually large dataset allows us to precisely estimate increases in almost all types of crimes - including offenses with no economic motivation - as well as spillover effects on other household members. The estimated effects remain robust when restricting to arrests "in flagrante", which are less subject to differential reporting by employment status. We then evaluate the mitigating effect of unemployment benefits leveraging on discontinous changes in eligibility. Regression discontinuity estimates suggest that unemployment benefits covering 3 to 5 months after displacement completely offset potential crime increases upon job loss, especially for liquidity-constrained individuals, although this e effect completely vanishes upon benefit expiration. Our findings point at liquidity constraints and psychological stress as main drivers of criminal behavior upon job loss, while substitution between time on the job and leisure does not seem to play an important role.
    Keywords: helicopter unemployment, crime, unemployment insurance, registry data
    JEL: K42 J63 J65
    Date: 2020
  27. By: Ruf, Johannes; Xie, Kangjianan
    Abstract: The effect of proportional transaction costs on systematically generated portfolios is studied em- pirically. The performance of several portfolios (the index tracking portfolio, the equally-weighted portfolio, the entropy-weighted portfolio, and the diversity-weighted portfolio) in the presence of dividends and transaction costs is examined under different configurations involving the trading fre- quency, constituent list size, and renewing frequency. All portfolios outperform the index tracking portfolio in the absence of transaction costs. This outperformance is statistically significant for daily and weekly traded portfolios but not for monthly traded portfolios. However, when proportional transaction costs of 0.5% are imposed, most portfolios no longer outperform the market. Some exceptional cases include the entropy-weighted and the diversity-weighted portfolios under specific configurations. The only statistical significant difference appears for the relative underperformance of the equally-weighted portfolio.
    Keywords: diversity-weighted portfolio; equally-weighted portfolio; functionally generated portfolio; portfolio analysis; stochastic portfolio theory; transaction cost
    JEL: F3 G3
    Date: 2020
  28. By: Valerie Bostwick (Department of Economics, The Ohio State University); Stefanie Fischer (Department of Economics, California Polytechnic State University); Matthew Lang (Department of Economics, University of California, Riverside)
    Abstract: We examine the impact of US colleges and universities switching from an academic quarter calendar to a semester calendar on student outcomes. Using panel data on the near universe of four-year nonprofit institutions and leveraging quasi-experimental variation in calendars across institutions and years, we show that switching from quarters to semesters negatively impacts on-time graduation rates. Event study analyses show that these negative effects persist well beyond the transition. Using detailed administrative transcript data from one large state system, we replicate this analysis at the student-level and investigate several possible mechanisms. We find shifting to a semester: (1) lowers first-year grades; (2) decreases the probability of enrolling in a full course load; and (3) delays the timing of major choice. By linking transcript data with the Unemployment Insurance system, we find minimal evidence that a semester calendar leads to increases in summer internship-type employment.
    Keywords: Postsecondary Graduation Rates, Education Policy, Academic Calendar, Postsecondary Retention
    JEL: I23
    Date: 2019
  29. By: Bublil, Shalom; Gandal, Neil; Riordan, Michael
    Abstract: Few would dispute that cyber risk is a very serious problem for the global economy and for society. But there is a "disconnect" between acknowledgement of the problem and action to address the problem. What is the relationship between vulnerabilities, preventive measures, and security incidents, like the leaking of sensitive data (say credit card information) to the web? To the best of our knowledge, little if anything is known about the relationship among these variables and no one has examined this issue empirically at the micro level, that is, at the level of the firm. In this paper, we put together a remarkable and unique cross-sectional data set at the firm level that includes information on vulnerabilities, attempted email attacks, incidents (breaches), precautions (security measures.) and firm characteristics. The data set contains slightly under 1000 small and medium firms in the U.K. We empirically examine the data and show that there are meaningful correlations among incidents and the other variables. Finally, we estimate a reduced form model with incidents as the dependent variable to illustrate the potential from employing such data.
    Keywords: cyber insurance; cyber risk; cyber security; empirical
    Date: 2020–03

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