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on Insurance Economics |
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Issue of 2020‒11‒16
fourteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Canta, Chiara; Cremer, Helmuth |
| Abstract: | We study the design of social long-term care (LTC) insurance when informal care is exchange-based. Parents do not observe their children's cost of providing care, which is continuously distributed over some interval. They choose a rule specifying transfers that are conditional on the level of informal care. Social LTC insurance is designed to maximize a weighted sum of parents' and children's utility. The optimal uniform public LTC insurance can fully cover the risk of dependence but parents continue to bear the risk of having children with a high cost of providing care. A nonlinear policy conditioning LTC benets on transfers provides full insurance even for this risk. Informal care increases with the children's welfare weight. Our theoretical analysis is completed by numerical solutions based on a calibrated example. In the uniform case, public care should represent up to 40% of total care but its share decreases to about 30% as the weight of children increases. In the nonlinear case, public care increases with the children's cost of providing care at a faster rate when children's weight in social welfare is higher. It represents 100% of total care for the families with high-cost children. |
| Keywords: | Long-term care; informal care; strategic bequests; asymmetric information |
| JEL: | H2 H5 |
| Date: | 2020–11–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124871&r=all |
| By: | Denise Hoffman; John T. Jones; Benjamin Fischer; Alex Bryce |
| Abstract: | This study, covering the period from January 2008 to December 2016, is the first to provide longitudinal statistics on the monthly prevalence of work-related overpayments to Social Security Disability Insurance (DI) beneficiaries. |
| Keywords: | disability, Social Security, overpayments, employment |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:8601e07e972249c696b8c8bce346dfc6&r=all |
| By: | Andreas Lichter (DICE, Heinrich-Heine University Düsseldorf, IZA and CReAM); Amelie Schiprowski (University of Bonn, IZA and CESifo) |
| Abstract: | This paper studies how the potential duration of unemployment benefits affects early job search behavior and re-employment outcomes. We exploit an unexpected reform of the German unemployment insurance (UI) scheme in 2008, which increased the potential benefit duration from 12 to 15 months for benefit recipients of age 50 to 54. Based on detailed survey data and a difference-in-differences design, we estimate that one additional month of potential benefits reduces early job applications by around 10%. Using social security data, we further find that the extension of benefits increases the average nonemployment duration of individuals entering UI after the reform. Among individuals who got treated at later stages of their unemployment spell, the increased UI coverage does not appear to come at the cost of longer nonemployment. A cautious back-of-the-envelope calculation reveals substantial job funding returns to early search effort. |
| Keywords: | Unemployment Insurance, Job Search, Re-Employment Outcomes, Natural Experiment |
| JEL: | D83 I38 J64 J68 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:037&r=all |
| By: | Delay, Nathan; Chouinard, Hayley; Walters, Cory; Wandschneider, Philip |
| Keywords: | Production Economics, Farm Management |
| Date: | 2020–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nbaece:307133&r=all |
| By: | Sharma, Sankalp; Walters, Cory |
| Keywords: | Production Economics, Farm Management |
| Date: | 2019–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nbaece:307110&r=all |
| By: | Serdar Birinci; Kurt See |
| Abstract: | We study optimal unemployment insurance (UI) policy over the business cycle, using a heterogeneous agent job-search model with aggregate risk and incomplete markets. We validate the model-implied micro and macro labor market elasticities to changes in the generosity of UI benefits against existing estimates and we reconcile divergent empirical findings. We show that generating the observed demographic differences between UI recipients and non-recipients is critical for determining the magnitudes of these elasticities. We find that the optimal UI policy features countercyclical replacement rates with an average generosity that is close to current U.S. policy but that it adopts drastically longer payment durations reminiscent of European policies. |
| Keywords: | Business fluctuations and cycles; Fiscal policy; Labour markets |
| JEL: | E32 J65 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-47&r=all |
| By: | Stefan Kremsner; Alexander Steinicke; Michaela Sz\"olgyenyi |
| Abstract: | In insurance mathematics optimal control problems over an infinite time horizon arise when computing risk measures. Their solutions correspond to solutions of deterministic semilinear (degenerate) elliptic partial differential equations. In this paper we propose a deep neural network algorithm for solving such partial differential equations in high dimensions. The algorithm is based on the correspondence of elliptic partial differential equations to backward stochastic differential equations with random terminal time. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.15757&r=all |
| By: | Marco Caliendo (University of Potsdam, IZA Bonn, DIW Berlin, IAB Nuremberg); Deborah A. Cobb-Clark (UUniversity of Sydney, IZA, ARC Centre of Excellence for Families and Children Over the Life Course); Cosima Obst (University of Potsdam); Arne Uhlendorff (CREST, CNRS, IP Paris, IAB, IZA, DIW) |
| Abstract: | We analyze workers’ risk preferences and training investments. Our conceptual framework differentiates between the investment risk and insurance mechanisms underpinning training decisions. Investment risk leads risk-averse workers to train less; they undertake more training if it insures them against future losses. We use the German Socio-Economic Panel (SOEP) to demonstrate that risk affinity is associated with more training, implying that, on average, investment risks dominate the insurance benefits of training. Crucially, this relationship is evident only for general training; there is no relationship between risk attitudes and specific training. Thus, as expected, risk preferences matter more when skills are transferable – and workers have a vested interest in training outcomes – than when they are not. Finally, we provide evidence that the insurance benefits of training are concentrated among workers with uncertain employment relationships or limited access to public insurance schemes. |
| Keywords: | Human Capital Investment, Work-related Training, Risk Preferences |
| JEL: | J24 C23 D81 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:23&r=all |
| By: | Sarah Bensalem; Nicolás Hernández Santibáñez (UCHILE - Universidad de Chile = University of Chile [Santiago]); Nabil Kazi-Tani |
| Abstract: | This paper deals with an optimal linear insurance demand model, where the protection buyer can also exert time-dynamic costly prevention effort to reduce her risk exposure. This is expressed as a stochastic control problem, in which the agent maximizes an exponential utility of her terminal wealth. We assume that the effort reduces the intensity of the jump arrival process, and we interpret this as dynamic self-protection. We solve the problem using a dynamic programming principle approach, and we provide a representation of the value function using a particular backward SDE. This allows us to solve the problem explicitly: we identify the dynamic certainty equivalent of the agent, and prove that the dynamic effort is actually constant, for a large class of loss processes. This shows in particular that the Lévy property is preserved under exponential utility maximization. We also characterize the constant effort as a the unique minimizer of an explicit Hamiltonian, from which we can determine the optimal effort in particular cases. Finally, after studying the dependence of the BSDE on the linear insurance contract parameter, we prove the existence of an optimal linear cover, that is not necessarily zero or full insurance. |
| Keywords: | Self-Protection,Prevention effort,Dynamic programming,Continuation utility,Backward SDEs |
| Date: | 2020–10–22 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02974961&r=all |
| By: | Loukas Balafoutas (University of Innsbruck, Austria); Helena Fornwagner (University of Regensburg, Germany); Rudolf Kerschbamer (University of Innsbruck, Austria); Matthias Sutter (University of Innsbruck, Austria; Max Planck Institute for Research on Collective Goods, IZA Bonn and CESifo Munich, Germany; University of Cologne, Germany); Maryna Tverdostup (University of Innsbruck, Austria) |
| Abstract: | Credence goods markets – like for health care or repair services – with their informational asymmetries between sellers and customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. We present the first model that considers both diagnostic uncertainty of sellers and the effects of insurance coverage of consumers in a unified framework. We test the model’s predictions in a laboratory experiment. Both in theory and in the experiment diagnostic uncertainty decreases the rate of efficient service provision and leads to less trade. In theory, insurance also decreases the rate of efficient service provision, but at the same time it also increases the volume of trade, leading to an ambiguous net effect on welfare. In the experiment, the net effect of insurance coverage on efficiency turns out to be positive. We also uncover an important interaction effect: if consumers are insured, experts invest less in diagnostic precision. We discuss policy implications of our results. |
| Keywords: | Credence goods, diagnostic uncertainty, insurance coverage, welfare, model, experiment |
| JEL: | C91 C72 D82 G22 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:038&r=all |
| By: | Loukas Balafoutas (University of Innsbruck); Helena Fornwagner (University of Regensburg); Rudolf Kerschbamer (University of Innsbruck); Matthias Sutter (Max Planck Institute for Research on Collective Goods); Maryna Tverdostup (University of Innsbruck) |
| Abstract: | Credence goods markets – like for health care or repair services – with their informational asymmetries between sellers and customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. We present the first model that considers both diagnostic uncertainty of sellers and the effects of insurance coverage of consumers in a unified framework. We test the model’s predictions in a laboratory experiment. Both in theory and in the experiment diagnostic uncertainty decreases the rate of efficient service provision and leads to less trade. In theory, insurance also decreases the rate of efficient service provision, but at the same time it also increases the volume of trade, leading to an ambiguous net effect on welfare. In the experiment, the net effect of insurance coverage on efficiency turns out to be positive. We also uncover an important interaction effect: if consumers are insured, experts invest less in diagnostic precision. We discuss policy implications of our results. |
| Keywords: | Credence goods, diagnostic uncertainty, insurance coverage, welfare, model, experiment |
| JEL: | C91 C72 D82 G22 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2020_26&r=all |
| By: | Dietmar Pfeifer; Doreen Strassburger; Joerg Philipps |
| Abstract: | In this paper we review Bernstein and grid-type copulas for arbitrary dimensions and general grid resolutions in connection with discrete random vectors possessing uniform margins. We further suggest a pragmatic way to fit the dependence structure of multivariate data to Bernstein copulas via grid-type copulas and empirical contingency tables. Finally, we discuss a Monte Carlo study for the simulation and PML estimation for aggregate dependent losses form observed windstorm and flooding data. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2010.15709&r=all |
| By: | Aurelija Anciūtė; Viginta Ivaškaitė-Tamošiūnė; Anamaria Maftei; Janos Varga |
| Abstract: | In 2019, Lithuania overhauled the country’s labour taxation. Social insurance contributions paid by employers and employees were consolidated, and were accompanied by adjustments in gross wages and personal income tax rates, and increases in the minimum gross wage and the tax-free allowance. Simultaneously, the government increased the universal child benefit. Simulations based on the EUROMOD and QUEST models are used to assess the fiscal, redistributive, equity and macroeconomic impact of these reforms. Overall, the set of simulated changes marginally decreases the tax wedge, poverty and income inequality. The labour taxation reform is estimated to be costly, with a small stimulating effect on the economy. |
| Keywords: | Lithuania, labour taxation, child benefits, social insurance contributions, minimum wage, tax wedge, disposable income, income inequality, poverty, growth, Anciūtė, Ivaškaitė-Tamošiūnė, Maftei, Varga. |
| JEL: | D04 D31 D63 E62 H23 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:euf:ecobri:059&r=all |
| By: | Ariella Kahn-Lang Spitzer; Marisa Shenk; James Mabli |
| Abstract: | In 2018, 14.3 million US households experienced food insecurity, which has been linked to negative health outcomes such as depression and anxiety, diabetes, and hypertension. |
| Keywords: | food access limitations, older adults, meal services, adverse health events, Nutrition Services Program, Medicare claims data, congregate meal, home-delivered meal |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:35f96f37dab1474f8502e46cdc957c8b&r=all |