nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒02‒22
nine papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. The Effects of the Affordable Care Act Dependent Coverage Mandate on Parents' Labor Market Outcomes By Kim, Seonghoon; Koh, Kanghyock
  2. Unemployment Insurance as a Worker Indiscipline Device? Evidence from Scanner Data By Lusher, Lester; Schnorr, Geoffrey; Taylor, Rebecca L.C.
  3. Can Information Influence the Social Insurance Participation Decision of China's Rural Migrants? By Giles, John T.; Meng, Xin; Xue, Sen; Zhao, Guochang
  4. The costs and benefits of reinsurance By Cummins, J. David; Dionne, Georges; Gagné, Robert; Nouira, Abdelhakim
  5. The Behavioral Foundations of Default Effects: Theory and Evidence from Medicare Part D By Zarek Brot-Goldberg; Timothy J. Layton; Boris Vabson; Adelina Yanyue Wang
  6. Measuring the Labor Market at the Onset of the COVID-19 Crisis By Alexander W. Bartik; Marianne Bertrand; Feng Lin; Jesse Rothstein; Matt Unrath
  7. Teens and Vaping: What’s the Latest Trend By Lydia Park; Douglas Klein
  8. The Green New Deal: Historical Foundations, Economic Fundamentals and Implementation Strategies By Julia M. Puaschunder
  9. Aggregate Employment Effects of Unemployment Benefits During Deep Downturns: Evidence from the Expiration of the Federal Pandemic Unemployment Compensation By Arindrajit Dube

  1. By: Kim, Seonghoon (Singapore Management University); Koh, Kanghyock (Korea University)
    Abstract: We examine the labor market impacts of the Affordable Care Act dependent mandate (ACA-DM), which has significantly increased dependent children's health insurance coverage through parents' employer-sponsored health benefits. Using data from the American Community Survey, we find that the ACA-DM reduced parents' annual wages by about $2,600. However, the probability of employment and working hours only decreased marginally. The back-of-the-envelope calculation indicates that the magnitude of the estimated wage impact is similar to the increased insurance premium of a family plan due to the ACA-DM. These findings imply that a deadweight loss associated with the expansion of dependent health coverage is likely to be small as an increase in employers' labor costs is offset by a reduction in parents' wages without significant reductions in labor inputs.
    Keywords: The Affordable Care Act dependent mandate, dependent health insurance coverage, parents’ labor market outcomes, deadweight loss
    JEL: I18 J32 H51
    Date: 2021–02
  2. By: Lusher, Lester (University of Hawaii at Manoa); Schnorr, Geoffrey (University of California, Davis); Taylor, Rebecca L.C. (University of Sydney)
    Abstract: We provide causal evidence of an ex ante moral hazard effect of Unemployment Insurance (UI) by matching plausibly exogenous changes in UI benefit duration across state-weeks during the Great Recession to high-frequency productivity measures from individual supermarket cashiers. Estimating models with day and cashier-register fixed effects, we identify a modest but statistically significant negative relationship between UI benefits and worker productivity. This effect is strongest for more experienced and less productive cashiers, for whom UI expansions are especially relevant. Additional analyses from the American Time Use Survey reveal a similar increase in shirking during periods with increased UI benefit durations.
    Keywords: scanner data, shirking, unemployment insurance
    JEL: I38 J24 J38 J65 L81
    Date: 2021–02
  3. By: Giles, John T. (World Bank); Meng, Xin (Australian National University); Xue, Sen (Jinan University); Zhao, Guochang (Southwest University of Finance and Economics, Chengdu)
    Abstract: This paper uses a randomized information intervention to shed light on whether poor understanding of social insurance, both the process of enrolling and costs and benefits, drives the relatively low rates of participation in urban health insurance and pension programs among China's rural-urban migrants. Among workers without a contract, the information intervention has a strong positive effect on participation in health insurance and, among younger age groups, in pension programs. Migrants are responsive to price: in cities where the premia are low relative to earnings, information induces health insurance participation, while declines are observed in cities with high relative premia.
    Keywords: migration, social insurance, information, randomised controlled trial
    JEL: H53 H55 J46 J61 O15 O17 O53 P35
    Date: 2021–02
  4. By: Cummins, J. David (Temple University); Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Gagné, Robert (HEC Montreal, Department of Applied Economics); Nouira, Abdelhakim (HEC Montreal, Canada Research Chair in Risk Management)
    Abstract: Purchasing reinsurance reduces insurers’ insolvency risk by stabilizing loss experience, increasing capacity, limiting liability on specific risks, and/or protecting against catastrophes. Consequently, reinsurance purchase should reduce capital costs. However, transferring risk to reinsurers is expensive. The cost of reinsurance for an insurer can be much larger than the actuarial price of the risk transferred. In this article, we analyze empirically the costs and the benefits of reinsurance for a sample of U.S. property-liability insurers. The results show that reinsurance purchase increases significantly the insurers’ costs but reduces significantly the volatility of the loss ratio. With purchasing reinsurance, insurers accept to pay higher costs of insurance production to reduce their underwriting risk.
    Keywords: Reinsurance; insolvency risk; risk management; financial intermediation; cost function; panel data
    JEL: C34 C35 G21 G22
    Date: 2021–02–10
  5. By: Zarek Brot-Goldberg (University of California, Berkeley - Department of Economics); Timothy J. Layton (Harvard Medical School - Department of Healthcare Policy; NBER); Boris Vabson (Harvard Medical School - Department of Healthcare Policy); Adelina Yanyue Wang (Federal Reserve Bank of Atlanta)
    Abstract: We leverage two unique natural experiments to show that, in public drug insurance for the low-income elderly in the U.S., defaults have large and persistent effects on plan enrollment and beneficiary drug utilization. We estimate that when a beneficiary’s default is exogenously changed from one year to the next, over 90% of beneficiaries follow that default. We then develop a general framework for choice under costly cognition that allows for the possibility that either paternalistic defaults that steer consumers to plans that suit them (Thaler and Sunstein 2008) or ‘shocking’ defaults that trigger consumers to make active choices (Carroll et al. 2009) could be optimal. We show that optimal default design depends on a previously-overlooked parameter: The elasticity of active choice propensity with respect to the value of the default. Leveraging variation in the match value of randomly-assigned default plans, we estimate an elasticity close to zero: There is little difference in the probability of active choice between beneficiaries assigned a well-matched default versus beneficiaries assigned a poorly-matched default. We also show that this passivity has real consequences, with beneficiaries assigned poorly-matched defaults experiencing large declines in drug consumption relative to those assigned well-matched defaults. This suggests that any potential welfare gains from an active choice response induced by a poorly-matched default are likely to be small and outweighed by the welfare losses due to reductions in drug consumption among beneficiaries who follow the poorly-matched default. Using a third natural experiment and a structural model of attention, we find that the little active choice that is present in this market appears to be largely random, with two-thirds of the variation in active choice coming from within-beneficiary transitory shocks to attention. Our results show that default rules are an integral part of insurance market design and that beneficiaries are likely to benefit from paternalistic defaults rather than be hurt by them.
    Date: 2020
  6. By: Alexander W. Bartik (University of Illinois Urbana-Champaign - Department of Economics); Marianne Bertrand (University of Chicago - Booth School of Business); Feng Lin (University of Chicago - Booth School of Business); Jesse Rothstein (University of California, Berkeley - Goldman School of Public Policy and Department of Economics); Matt Unrath (University of California, Berkeley - Goldman School of Public Policy)
    Abstract: We use traditional and non-traditional data to measure the collapse and partial recovery of the U.S. labor market from March to early July, contrast this downturn to previous recessions, and provide preliminary evidence on the effects of the policy response. For hourly workers at both small and large businesses, nearly all of the decline in employment occurred between March 14 and 28. It was driven by low-wage services, particularly the retail and leisure and hospitality sectors. A large share of the job losses in small businesses reflected firms that closed entirely, though many subsequently reopened. Firms that were already unhealthy were more likely to close and less likely to reopen, and disadvantaged workers were more likely to be laid off and less likely to return. Most laid off workers expected to be recalled, and this was predictive of rehiring. Shelter-in-place orders drove only a small share of job losses. Last, states that received more small business loans from the Paycheck Protection Program and states with more generous unemployment insurance benefits had milder declines and faster recoveries. We find no evidence that high UI replacement rates drove job losses or slowed rehiring.
    JEL: E24 E32 J2 J63
    Date: 2020
  7. By: Lydia Park (Western Reserve Academy, USA); Douglas Klein (New Jersey City University, USA)
    Abstract: Vape detectors are installed at many US schools due to the increase in vaping amongst teenagers. The US Centers for Disease Control stated that E-cigarettes are not safe for teens as they may cause severe lung damage. In 2019, there was a national outbreak of e-cigarette product use-associated lung injury (EVALI), which led to the hospitalization of 2807 patients, 15% of which were 18 or younger. One teenage vaper needed dual lung transplants. Roughly 3.6 million middle school and high school students use E-cigarettes - are they unaware of the harmful health, disciplinary, and emotional repercussions from vaping? Do parents feel disappointment if they are notified from schools that their children have been caught vaping? Are vaping companies like Juul, who sells 75% of vaping products, marketing their E-cigarettes by concealing the health risks? JUUL is being sued by many states and school districts for misleading advertising. States have already banned JUUL’s sales of vaping products with fruity names. The recent COVID-19 pandemic prompted numerous teenagers to quit vaping as the coronavirus spreads by droplets, including saliva. Due to the higher risk of severe lung damage with the coronavirus and vaping, are more teenagers seeking cessation treatment? Although the Affordable Care Act provides coverage for temporary addiction treatment medication and family counseling, teenagers should be aware that it is not a magic solution for everything. Some teenagers hide vaping pens as medical treatment may cause a significant surcharge on annual insurance premiums.
    Keywords: vaping, Juul, e-cigarettes, EVALI, pods, Juul marketing to minors, e-cigarettes, marketing vaping to teens, health effects of vaping, medical treatment for vaping
    Date: 2020–08
  8. By: Julia M. Puaschunder (The New School, USA)
    Abstract: The Green New Deal (GND) serves as market solution to implement global environmental governance as “the sum of the many ways individuals and institutions, public and private, manage their common affairs.†This paper discusses the historical foundations, underlying economic mechanisms of the GND and contemporary implementation strategies of the GND. GND spending should target social and green causes fostering concepts such as eco-commerce, environmental enterprise, environmental finance, fiscal environmentalism, green accounting, economy, jobs and trading as well as sustainable energy. The economic policies proposed comprise of fiscal and monetary means, innovation efforts and behavioral changes. Concrete recommendations are given on carbon tax, emissions trading, green bonds, absorbing CO2 and forestation, insurance policies, intergenerational conscientiousness, engaging portfolio managers, ecotax, environmental pricing reform, environmental tariffs, net metering, Pigovian tax and sustainable tourism. All these efforts are to support global environmental governance. The paper closes with a prospective outlook of changes implied to the GND due to the novel Coronavirus (COVID-19) crisis.
    Keywords: The Green New Deal, carbon tax, emissions trading, governance, green bonds, environmental costs, insurance policies, intergenerational conscientiousness
    Date: 2020–08
  9. By: Arindrajit Dube
    Abstract: The expiration of the temporary $600 boost to weekly UI benefits under the Federal Pandemic Unemployment Compensation (FPUC) led to a sharp, unprecedented, 98 percentage point reduction (on average) in the replacement rate during a time when employment was recovering during the Covid recession. Leveraging the considerable variation in this drop across states, I use a difference-in-differences event study design to estimate the macro employment effects. I find little impact of job gains from the benefit reduction, especially when I focus on groups (non-college graduates, and those from non-high-income households) that comprise of most UI recipients. The estimates rule out job gains implied by much of the micro UI duration elasticities from the existing literature.
    JEL: E24 E62 E65
    Date: 2021–02

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