nep-ias New Economics Papers
on Insurance Economics
Issue of 2020‒10‒26
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Effects of the Affordable Care Act on the Near-Elderly: Evidence for Health Insurance Coverage and Labor Market Outcomes By Mark Duggan; Gopi Shah Goda; Gina Li
  2. COVID-19 and Property-Liability Insurance in India: Impact and Prospect By Ghosh, Amlan; Mukherjee, Abhijit
  3. Optimal Insurance under Maxmin Expected Utility By Corina Birghila; Tim J. Boonen; Mario Ghossoub
  4. Accelerated Failure Time Models: An Application in Insurance Attrition By Abdul-Fatawu Majeed
  5. Development and application of quantitative methods for assessing citizens' preferences in relation to public projects By Neustadt, Ilya (Нейштадт, Илья)
  6. Resource Blessing? Oil, Risk, and Religious Communities as Social Insurance in the U.S. South By Ferrara, Andreas; Testa, Patrick A.
  7. The Consequences of the COVID-19 Job Losses: Who Will Suffer Most and by How Much? By Andreas Gulyas; Krzysztof Pytka
  8. Capital Regulations and the Management of Credit Commitments during Crisis Times By Pelzl, Paul; Valderrama, Maria Teresa
  9. Banks, Non Banks, and Lending Standards By R. Matthew Darst; Ehraz Refayet; Alexandros Vardoulakis
  10. Medical Research and Health Care Finance: Evidence from Academic Medical Centers By Pierre Azoulay; Misty L. Heggeness; Jennifer L. Kao
  11. Biographical By Thaler, Richard
  12. Youth entrepreneurship in agriculture and rural development: Nigeria By Babu, Suresh Chandra; Zhou, Yuan
  13. Health of Elderly Parents, their Children's Labor Supply, and the Role of Migrant Care Workers By Wolfgang Frimmel; Martin Halla; Joerg Paetzold; Julia Schmieder
  14. How Have Households Used Their Stimulus Payments and How Would They Spend the Next? By Olivier Armantier; Leo Goldman; Gizem Koşar; Jessica Lu; Rachel Pomerantz; Wilbert Van der Klaauw
  15. Spillovers of Program Benefits with Mismeasured Networks By Lina Zhang
  16. Income in the Off-Season: Household Adaptation to Yearly Work Interruptions By John M. Coglianese; Brendan M. Price

  1. By: Mark Duggan; Gopi Shah Goda; Gina Li
    Abstract: The Affordable Care Act (ACA) not only changed the landscape of health insurance coverage in the United States, but also affected the relationship between working decisions and health insurance. In this paper, we estimate the impact of the ACA on the near-elderly (ages 60-64) in the five years after the implementation of its key provisions in early 2014. We exploit variation across geographic areas in the pre-existing level of uninsurance and use 65-69 year olds, whose insurance coverage was unaffected by the ACA, as a within-region control group. Our findings indicate that the ACA increased health insurance coverage among the near elderly by approximately 4.5 percentage points and reduced their labor force participation rate by approximately 0.6 percentage points.
    JEL: H2 H31 H51 H75 I13 J14 J21 J26
    Date: 2020–10
  2. By: Ghosh, Amlan; Mukherjee, Abhijit
    Abstract: An unprecedented crisis in the form of COVID-19 has posed a significant problem to both the lives and livelihood of the people around the world. Economic activities of India are also affected by this pandemic with phase-wise lockdowns, implementation of social distancing measures, global economic downturn, and supply chain disruptions. With reduced economic activities and movement, the property-liability insurance (PLI) sector has also been impacted. In this paper, we assess the impact on the PLI sector in India, analyse the policies and steps taken by Government & regulatory authorities, and provided a future outlook depicting the way forward. The study will help policymakers and insurers to take a holistic view of the impact of the COVID-19 situation and plan for the future accordingly.
    Keywords: Property-Liability Insurance, Covid-19, India
    JEL: G22 G28 I13 O53
    Date: 2020–08–30
  3. By: Corina Birghila; Tim J. Boonen; Mario Ghossoub
    Abstract: We examine a problem of demand for insurance indemnification, when the insured is sensitive to ambiguity and behaves according to the Maxmin-Expected Utility model of Gilboa and Schmeidler (1989), whereas the insurer is a (risk-averse or risk-neutral) Expected-Utility maximizer. We characterize optimal indemnity functions both with and without the customary ex ante no-sabotage requirement on feasible indemnities, and for both concave and linear utility functions for the two agents. This allows us to provide a unifying framework in which we examine the effects of the no-sabotage condition, marginal utility of wealth, belief heterogeneity, as well as ambiguity (multiplicity of priors) on the structure of optimal indemnity functions. In particular, we show how the singularity in beliefs leads to an optimal indemnity function that involves full insurance on an event to which the insurer assigns zero probability, while the decision maker assigns a positive probability. We examine several illustrative examples, and we provide numerical studies for the case of a Wasserstein and a Renyi ambiguity set.
    Date: 2020–10
  4. By: Abdul-Fatawu Majeed (UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: Despite the seeming power of survival analysis over popular binary models in insurance attrition analysis, its consideration is now growing in the literature. Besides, studies have only considered the Kaplan-Meier estimator and the Cox proportional hazards model. To our knowledge, no single study has modeled insurance attrition using the accelerated failure time model. This study presents some parametric models in survival analysis, specifically, the accelerated failure time model. Furthermore, we investigate the applicability of this model in analyzing insurance attrition using life insurance data. We show for the first time that the accelerated failure time model offers an attractive alternative to the Kaplan-Meier estimator, and the Cox proportional hazards model in estimating insurance attrition. Based on the Akaike information criterion, the generalized gamma model provides the best fit for the data. This work will serve as the basis for the consideration of parametric survival models in estimating insurance attrition, deepen knowledge in retention analysis, and broaden the scope of survival analysis.
    Abstract: Malgré la puissance apparente de l'analyse de survie sur les modèles binaires populaires dans l'analyse de l'attrition de l'assurance, sa considération est maintenant de plus en plus prise en compte dans la littérature. En outre, les études n'ont considéré que l'estimateur de Kaplan-Meier et le modèle de risques proportionnels de Cox. À notre connaissance, aucune étude n'a modélisé l'attrition de l'assurance à l'aide du modèle de temps de défaillance accéléré. Cette étude présente quelques modèles paramétriques dans l'analyse de survie, en particulier le modèle de temps de défaillance accéléré. De plus, nous étudions l'applicabilité de ce modèle dans l'analyse de l'attrition de l'assurance à l'aide de données d'assurance-vie. Nous montrons pour la première fois que le modèle de temps de défaillance accéléré offre une alternative intéressante à l'estimateur de Kaplan-Meier et au modèle de risques proportionnels de Cox dans l'estimation de l'attrition de l'assurance. Sur la base du critère d'information d'Akaike, le modèle gamma généralisé fournit le meilleur ajustement pour les données. Ces travaux serviront de base à la prise en compte des modèles de survie paramétriques dans l'estimation de l'attrition de l'assurance, approfondiront les connaissances sur l'analyse de la rétention et élargiront la portée de l'analyse de survie.
    Keywords: Insurance attrition,Survival analysis,Accelerated failure time model,Proportional hazards model,Attrition d'assurance,Analyse de survie,Modèle de temps de défaillance accéléré,Modèle de risques proportionnels
    Date: 2020–12
  5. By: Neustadt, Ilya (Нейштадт, Илья) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: A review of scientific literature on the practice of assessing preferences in relation to public projects, an analysis of the practice used in assessing preferences in relation to public projects, as well as an analysis of statistical indicators used to analyze the objects under study. A sociological study of assessing the quality of budgetary medical services provided within the compulsory medical insurance system and the prospects for the development of voluntary medical insurance programs was carried out.
    Date: 2020–05
  6. By: Ferrara, Andreas (University of Pittsburgh); Testa, Patrick A. (Tulane University)
    Abstract: Religious communities are important providers of social insurance. We document the development of religious communities in the face of economic volatility associated with natural resource abundance, using variation in major oilfield discoveries in the U.S. South between 1890 and 1990. We find that oil discoveries predict large and persistent increases in church membership. Effects are increasing with oil price volatility and larger for “oil-dependent” counties with small pre-oil populations and manufacturing sectors. Consistent with social insurance, larger religious communities limit spillovers from oil shocks across sectors, smoothing unemployment, while access to credit, private insurance, and public social insurance attenuate effects.
    Keywords: Social insurance; resource abundance; religion; church membership; oil; risk JEL Classification: N31, N32, H41, G52
    Date: 2020
  7. By: Andreas Gulyas; Krzysztof Pytka
    Abstract: Using the universe of Austrian unemployment insurance records until May 2020, we document that the composition of UI claimants during the Covid-19 outbreak is sub- stantially di erent compared to past times. Using a machine-learning algorithm from Gulyas and Pytka (2020), we identify individual earnings losses conditional on worker and job characteristics. Covid-19-related job terminations are associated with lower losses in earnings and wages compared to the Great Recession, but similar employ- ment losses. We further derive an accurate but simple policy rule targeting individuals vulnerable to long-term wage losses.
    Keywords: Covid-19 , Job displacement, Earnings losses, Causal machine learning
    Date: 2020–09
  8. By: Pelzl, Paul (Dept. of Business and Management Science, Norwegian School of Economics); Valderrama, Maria Teresa (Oesterreichische Nationalbank)
    Abstract: Drawdowns on credit commitments by firms reduce a bank’s capital buffer. Exploiting Austrian credit register data and the 2008-09 financial crisis as exogenous shock to bank health, we provide novel evidence that capital-constrained banks manage this concern by substantially cutting partly or fully unused credit commitments. Controlling for a bank’s capital position, we further find that also larger liquidity problems induce banks to cut such commitments. These results show that banks manage both capital and liquidity risk posed by undrawn credit commitments in periods of financial distress, but thereby reduce liquidity insurance to firms exactly when they need it most.
    Keywords: Capital Regulations; Credit Commitments; Financial Crisis
    JEL: E51 G01 G21 G28 G32
    Date: 2020–10–15
  9. By: R. Matthew Darst; Ehraz Refayet; Alexandros Vardoulakis
    Abstract: We study how competition between banks and non-banks affects lending standards. Banks have private information about some borrowers and are subject to capital requirements to mitigate risk-taking incentives from deposit insurance. Non-banks are uninformed and market forces determine their capital structure. We show that lending standards monotonically increase in bank capital requirements. Intuitively, higher capital requirements raise banks’ skin in the game and screening out bad projects assures positive expected lending returns. Non-banks enter the market when capital requirements are sufficiently high, but do not cause a deterioration in lending standards. Optimal capital requirements trade-off inefficient lending to bad projects under loose standards with inefficient collateral liquidation under tight standards.
    Keywords: Lending standards; Credit cycles; Asymmetric information; Non-banks; Regulation
    JEL: G01 G21 G28
    Date: 2020–10–09
  10. By: Pierre Azoulay; Misty L. Heggeness; Jennifer L. Kao
    Abstract: Academic Medical Centers (AMCs)—comprising medical schools, teaching hospitals, and research laboratories)—play an important role in US biomedical innovation. The Balanced Budget Act of 1997 (BBA) changed the formula used to reimburse Medicare inpatient claims and subsidies for medical residents. We study the effect of changes in the generosity of clinical care reimbursements on the rate and direction of research performed within these institutions. We compare AMCs’ relative exposure to the reform and how these differences affect their researchers’ ability to attract NIH grant funding, as well as the quantity, impact, and content of their publications. We find that in response to the BBA, research activity increased by 10% among the average teaching hospital and 20% among major teaching hospitals, with larger effects observed for “translational” and clinical research. We find little evidence of concurrent changes in clinical outcomes.
    JEL: I13 I18 I23 O30
    Date: 2020–10
  11. By: Thaler, Richard (University of Chicago)
    Abstract: I was born in East Orange, New Jersey, on September 12, 1945. My father, Alan, was an actuary for Prudential Life Insurance, where he would spend most of his career. He had graduated from the University of Toronto, majoring in math and physics. Alas, I did not inherit his mathematical prowess. My mother Roslyn attended the now defunct Upsala College in East Orange. She was an elementary school teacher before having children: myself and my younger brothers, Donald and Maurice. Aside from a two-year stint in Los Angeles, where my father was temporarily transferred, I spent my youth in New Jersey. We lived in Chatham after returning from California.
    Keywords: Behavioraleconomics
    JEL: D03 D90 G02
    Date: 2020
  12. By: Babu, Suresh Chandra; Zhou, Yuan
    Abstract: Young people engaging in agricultural entrepreneurship in developing countries face several challenges. Above all, they lack adequate access to important resources and opportunities. These include land, credit, farm inputs, agronomic and vocational training, insurance, and lucrative markets. Addressing these challenges requires answers to some key questions: Which factors drive the success of youth entrepreneurs in developing countries? What type of business ‘ecosystem’ is best suited for their development? What roles should the various stakeholders play in making youth entrepreneurship flourish nationally? How can young people expand their start-ups to become small, medium, or largescale businesses? To answer these questions, the International Food Policy and Research Institute (IFPRI) and the Syngenta Foundation for Sustainable Agriculture (SFSA) developed a conceptual framework. This framework classifies contextual and driving factors that contribute to the success of youth entrepreneurship. There are four broad categories for intervention: policy, institutional, technological, and individual capabilities.
    Keywords: NIGERIA, WEST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, youth, rural areas, entrepreneurship, agriculture, rural development, developing countries, policies, technology, skills, youth entrepreneurship, conceptual framework
    Date: 2020
  13. By: Wolfgang Frimmel; Martin Halla; Joerg Paetzold (Universität Salzburg); Julia Schmieder
    Abstract: We estimate the impact of parental health on adult children’s labor market outcomes. We focus on health shocks which increase care dependency abruptly. Our estimation strategy exploits the variation in the timing of shocks across treated families. Empirical results based on Austrian administrative data show a significant negative impact on labor market activities of children. This effect is more pronounced for daughters and for children who live close to their parents. Further analyses suggest informal caregiving as the most likely mechanism. The effect is muted after a liberalization of the formal care market, which sharply increased the supply of foreign care workers.
    Keywords: Informal care, formal care, aging, health, labor supply, labor migration.
    JEL: J14 J22 I11 I18 R23
    Date: 2020–10
  14. By: Olivier Armantier; Leo Goldman; Gizem Koşar; Jessica Lu; Rachel Pomerantz; Wilbert Van der Klaauw
    Abstract: In this post, we examine how households used economic impact payments, a large component of the CARES Act signed into law on March 27 that directed stimulus payments to many Americans to help offset the economic fallout from the coronavirus pandemic. An important question in evaluating how much this part of the CARES Act stimulated the economy concerns what share of these payments households used for consumption—what economists call the marginal propensity to consume (MPC). There also is interest in learning the extent to which the payments contributed to the sharp increase in the U.S. personal saving rate during the early months of the pandemic. We find in this analysis that as of the end of June 2020, a relatively small share of stimulus payments—29 percent—was used for consumption, with 36 percent saved and 35 percent used to pay down debt. Reported expected uses for a potential second stimulus payment suggest an even smaller MPC, with households expecting to use more of the funds to pay down their debts. We find similarly small estimated average consumption out of unemployment insurance (UI) payments, but with somewhat larger shares of these funds used to pay down debt.
    Keywords: pandemic; stimulus payments; marginal propensity to consume; COVID-19
    JEL: I15 J01
    Date: 2020–10–13
  15. By: Lina Zhang
    Abstract: In studies of program evaluation under network interference, correctly measuring spillovers of the intervention is crucial for making appropriate policy recommendations. However, increasing empirical evidence has shown that network links are often measured with errors. This paper explores the identification and estimation of treatment and spillover effects when the network is mismeasured. I propose a novel method to nonparametrically point-identify the treatment and spillover effects, when two network observations are available. The method can deal with a large network with missing or misreported links and possesses several attractive features: (i) it allows heterogeneous treatment and spillover effects; (ii) it does not rely on modelling network formation or its misclassification probabilities; and (iii) it accommodates samples that are correlated in overlapping ways. A semiparametric estimation approach is proposed, and the analysis is applied to study the spillover effects of an insurance information program on the insurance adoption decisions.
    Date: 2020–09
  16. By: John M. Coglianese; Brendan M. Price
    Abstract: Joblessness is highly seasonal. To analyze how households adapt to seasonal joblessness, we introduce a measure of seasonal work interruptions premised on the idea that a seasonal worker will tend to exit employment around the same time each year. We show that an excess share of prime-age US workers experience recurrent separations spaced exactly 12 months apart. These separations coincide with aggregate seasonal downturns and are concentrated in seasonally volatile industries. Examining workers most prone to seasonal work interruptions, we find that these workers incur large earnings losses during the off-season. Lost earnings are (i) driven mainly by repeated separations from the same employer; (ii) not recouped at other firms; (iii) partly offset by unemployment benefits; and (iv) amplified by concurrent drops in partners' earnings. On net, household income falls by about 80 cents for each $1 lost in own earnings.
    Keywords: Seasonality; Seasonal employment; Job loss; Household income; Household labor dynamics; Unemployment; Unemployment insurance
    JEL: D10 E32 J63
    Date: 2020–10–07

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