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on Insurance Economics |
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Issue of 2021‒04‒05
sixteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Jeffrey D. Michler; Frederi G. Viens; Gerald E. Shively |
| Abstract: | We investigate the sources of variability in agricultural production and their relative importance in the context of weather index insurance for smallholder farmers in India. Using parcel-level panel data, multilevel modeling, and Bayesian methods we measure how large a role seasonal variation in weather plays in explaining yield variance. Seasonal variation in weather accounts for 19-20 percent of total variance in crop yields. Motivated by this result, we derive pricing and payout schedules for actuarially fair index insurance. These calculations shed light on the low uptake rates of index insurance and provide direction for designing more suitable index insurance. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.11047&r=all |
| By: | Zeno Enders; David A. Vespermann |
| Abstract: | We assess to which degree an international transfer mechanism can enhance consumption risk sharing as well as allocative efficiency and apply our results to the implicit transfers generated by a potential European unemployment benefit scheme (EUBS). Specifically, we first develop a simple model with nominal rigidities to build intuition by deriving analytical results. We then use a rich DSGE model, calibrated to the Core and the Periphery of the euro area, to quantitatively analyze the changing dynamics that a EUBS brings about. We find that a EUBS can provide risk sharing by stabilizing relative consumption as well as unemployment differentials. Following supply shocks, however, the cross-country transfer embodied in the unemployment benefits is spent to a large degree on relatively inefficiently produced goods in the receiving countries. This renders the allocation even more inefficient by opening country-specific labor wedges further, also after government-spending shocks. Yet, since this trade-off between allocative efficiency and consumption risk sharing does not exist after certain demand shocks, the welfare effects of a EUBS depend on the cause for international unemployment differentials. A EUBS that is only active after specific shocks would therefore maximize overall welfare. Even without this feature, a EUBS would raise Core’s welfare in the quantitative model, leaving Periphery’s welfare almost unchanged. |
| Keywords: | cross-country transfers, international unemployment insurance, EMU European business cycles, optimum currency area, structural reforms |
| JEL: | F45 F44 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8965&r=all |
| By: | Annarita Macchioni Giaquinto (Department of Economics, University Of Venice Cà Foscari; FAO); Andrew M. Jones (University of York; Monash University); Nigel Rice (University of York); Francesca Zantomio (Department of Economics, University Of Venice Cà Foscari; CRIEP, HEDG) |
| Abstract: | Shocks to health have been shown to reduce labour supply for the individual affected. Less is known about household self-insurance through a partner’s response to a health shock. Previous studies have presented inconclusive empirical evidence on the existence of a health-related `added worker effect’. We use UK longitudinal data to investigate within households both the labour supply and informal care responses of an individual to the event of an acute health shock to their partner. Relying on the unanticipated timing of shocks, we combine coarsened exact matching and entropy balancing algorithms with parametric analysis and exploit lagged outcomes to remove bias from observed confounders and time-invariant unobservables. We find no evidence of a health-related ‘added worker effect’. A significant and sizeable increase in spousal informal care, irrespective of spousal labour market position or household financial status and ability to purchase formal care provision, suggests a substitution to informal care provision, at the expense of time devoted to leisure activities. |
| Keywords: | Health shocks, added worker effect, labour supply, informal care, matching methods, panel data |
| JEL: | C14 I10 I13 J14 J22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2021:11&r=all |
| By: | Gerard, François; Naritomi, Joana |
| Abstract: | We study the spending profile of workers who experience both a positive transitory income shock (lump-sum severance pay) and a negative permanent income shock (layoff). Using de-identified expenditure and employment data from Brazil, we show that workers increase spending at layoff by 35 percent despite experiencing a 14 percent long-term loss. We find high sensitivity of spending to cash-on-hand across consumption categories and for several sources of variation, including predictable income drops. A model with present-biased workers can rationalize our findings, and highlights the importance of the timing of benefit disbursement for the consumption-smoothing gains of job displacement insurance policies. |
| Keywords: | SES-1757105 |
| JEL: | D12 J65 J63 O12 |
| Date: | 2021–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107127&r=all |
| By: | Müller, Armin; Ten Brink, Tobias |
| Abstract: | There are opposing views in the literature regarding the degree to which China's public administration adopted international models of administrative reform. Prospective payment systems constitute a formidable case for examining this question in the field of public hospital funding. In China's decentralized and fragmented health insurance system, different localities have chosen different approaches to replace retrospective with prospective payment models. Based on a relational case database, we analyzed how international payment reforms were introduced in a Chinese context as models with varying degrees of transfer and scopes of change. Furthermore, we reconstructed the process of diffusion, which was driven more by horizontal learning in the Urban Employees' Basic Medical Insurance (UEBMI), and more by hierarchical delegation in the New Rural Cooperative Medical Scheme (NRCMS). The two insurances were administered by different ministries, whose preferences facilitated the spread of different models of provider payment. Overall, the mainstream of reforms only achieved a limited displacement of retrospective payment: local governments often dropped the prospective payment aspect altogether or limited its application. In the NRCMS, more ambitious reforms were limited by state capacity, whereas the use of Medical Savings Accounts (MSAs) limited the potential of reforms in the UEBMI. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:udedao:1292021&r=all |
| By: | Pramod Kumar Sur |
| Abstract: | In India, households' use of primary health-care services presents a puzzle. Even though most private health-care providers have no formal medical qualifications, a significant fraction of households use fee-charging private health-care services, which are not covered by insurance. Although the absence of public health-care providers could partially explain the high use of the private sector, this cannot be the only explanation. The private share of health-care use is even higher in markets where qualified doctors offer free care through public clinics; despite this free service, the majority of health-care visits are made to providers with no formal medical qualifications. This paper examines the reasons for the existence of this puzzle in India. Combining contemporary household-level data with archival records, I examine the aggressive family planning program implemented during the emergency rule in the 1970s and explore whether the coercion, disinformation, and carelessness involved in implementing the program could partly explain the puzzle. Exploiting the timing of the emergency rule, state-level variation in the number of sterilizations, and an instrumental variable approach, I show that the states heavily affected by the sterilization policy have a lower level of public health-care usage today. I demonstrate the mechanism for this practice by showing that the states heavily affected by forced sterilizations have a lower level of confidence in government hospitals and doctors and a higher level of confidence in private hospitals and doctors in providing good treatment. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.13737&r=all |
| By: | Jonas Meier |
| Abstract: | This paper introduces multivariate distribution regression (MDR), a semi-parametric approach to estimate the joint distribution of outcomes. The method allows studying complex dependence structures and distributional treatment eects without making strong parametric assumptions. I show that the MDR coecient process converges to a Gaussian process and that the bootstrap is consistent for the asymptotic distribution of the estimator. Methodologically, MDR contributes by oering the analysis of many functionals of the CDF. For instance, this includes counterfactual distributions. Compared to copula models, MDR achieves the same accuracy but is (i) more robust to misspecication and (ii) allows to condition on many covariates, thus ensuring a high degree of exibility. Finally, an application analyzes shifts in spousal labor supply in response to a health shock. I find that if low-income individuals receive disability insurance benets, their spouses respond by increasing their labor supply. Whereas the opposite holds for high-income households, likely because they are well insured and can aord to work fewer hours. |
| Keywords: | Distribution regression; joint distribution; decomposition analysis, distributional treatment eects |
| JEL: | C14 C21 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2023&r=all |
| By: | Michael Geruso; Michael R. Richards |
| Abstract: | Medicare pricing is known to indirectly influence provider prices and care provision for non-Medicare patients; however, Medicare’s regulatory externalities beyond fee-setting are less well understood. We study how physicians’ outpatient surgery choices for non-Medicare patients responded to Medicare removing a ban on ambulatory surgery center (ASC) use for a specific procedure. Following the rule change, surgeons began reallocating both Medicare and commercially insured patients to ASCs. Specifically, physicians became 70% more likely to use ASCs for the policy-targeted procedure among their non-Medicare patients. These novel findings demonstrate that Medicare rulemaking affects physician behavior beyond the program’s statutory scope. |
| JEL: | H23 H42 H51 I11 I13 I18 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28576&r=all |
| By: | Casey B. Mulligan |
| Abstract: | Based on published estimates of its price elasticity of demand and of tax wedges, as well as the method of revealed preference, I estimate that the annual social value of ESI is about $1.5 trillion beyond what policyholders, their employers, and taxpayers pay for it. The private component of that value, which in some respects is the other side of “job lock,” derives in part from group plans, with the group determined by many characteristics other than the demand for healthcare. With voluntary groups formed this way, adverse risk selection is reduced, the groups can be effective at obtaining substantial discounts and rebates for their members, and division of labor employed in shopping for health providers. ESI is also a mechanism for employers to act on their incentives for a healthy and productive workforce. External effects include tax externalities (in both directions), encouraging work, and easing government expenditure obligations by helping to prevent people from going without health insurance. |
| JEL: | D40 D71 H30 I13 J32 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28590&r=all |
| By: | Kerstin D\"achert; Ria Grindel; Elisabeth Leoff; Jonas Mahnkopp; Florian Schirra; J\"org Wenzel |
| Abstract: | In this paper we consider the strategic asset allocation of an insurance company. This task can be seen as a special case of portfolio optimization. In the 1950s, Markowitz proposed to formulate portfolio optimization as a bicriteria optimization problem considering risk and return as objectives. However, recent developments in the field of insurance require four and more objectives to be considered, among them the so-called solvency ratio that stems from the Solvency II directive of the European Union issued in 2009. Moreover, the distance to the current portfolio plays an important role. While literature on portfolio optimization with three objectives is already scarce, applications with four and more objectives have not yet been solved so far by multi-objective approaches based on scalarizations. However, recent algorithmic improvements in the field of exact multi-objective methods allow the incorporation of many objectives and the generation of well-spread representations within few iterations. We describe the implementation of such an algorithm for a strategic asset allocation with four objective functions and demonstrate its usefulness for the practitioner. Our approach is in operative use in a German insurance company. Our partners report a significant improvement in their decision making process since, due to the proper integration of the new objectives, the software proposes portfolios of much better quality than before within short running time. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.10958&r=all |
| By: | Jos\'e Miguel Flores Contr\'o; Kira Henshaw; Sooie-Hoe Loke; S\'everine Arnold; Corina Constantinescu |
| Abstract: | In this article, we consider a compound Poisson-type model for households' capital. Using risk theory techniques, we determine the probability of a household falling under the poverty line. Microinsurance is then introduced to analyse its impact as an insurance solution for the lower income class. Our results validate those previously obtained with this type of model, showing that microinsurance alone is not sufficient to reduce the probability of falling into the area of poverty for specific groups of people, since premium payments constrain households' capital growth. This indicates the need for additional aid particularly from the government. As such, we propose several premium subsidy strategies and discuss the role of government in subsidising microinsurance to help reduce poverty. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.17255&r=all |
| By: | Loïc Berger (IÉSEG School Of Management [Puteaux], EIEE - European Institute on Economics and the Environment, CMCC - Centro Euro-Mediterraneo per i Cambiamenti Climatici [Bologna], LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique); Valentina Bosetti (Bocconi University [Milan, Italy]) |
| Abstract: | We report the results of an experiment eliciting individuals' attitudes toward risk and model uncertainty. Using a joint elicitation procedure, we then precisely quantify the strength of individuals' attitude toward ambiguity in the context of the smooth model and characterize its main properties. Our results provide empirical evidence of decreasing absolute ambiguity aversion (DAAA) and constant relative ambiguity aversion (CRAA). These results shed new light on the way ambiguity attitudes may affect important decisions, such as the choice of health insurance policies or the optimal investment strategy in the face of climate change. |
| Keywords: | Ambiguity aversion,Laboratory experiment,Non-expected utility,Subjective probabilities,Decreasing absolute ambiguity aversion |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03031502&r=all |
| By: | Jan Christoph Schlegel; Akaki Mamageishvili |
| Abstract: | Second-price auctions with deposits are frequently used in blockchain environments. An auction takes place on-chain: bidders deposit an amount that fully covers their bid in a smart contract. The deposit is used as insurance against bidders not honoring their bid if they win. The deposit, but not the bid, is publicly observed during the bidding phase of the auction. The visibility of deposits can fundamentally change the strategic structure of the auction if bidding happens sequentially: Bidding is costly since the deposit has to be staked for a substantial amount of time. Thus, deposits can be used as a costly signal for a high valuation. This is the source of multiple inefficiencies: To engage in costly signaling, a bidder who bids first and has a high valuation will generally over-deposit in equilibrium, i.e. deposit more than he will bid. If high valuations are likely there can, moreover, be entry deterrence through high deposits: a bidder who bids first can deter subsequent bidders from entering the auction. Pooling can happen in equilibrium, where bidders of different valuations deposit the same amount. The auction fails to allocate the item to the bidder with the highest valuation. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.16681&r=all |
| By: | Graziella Bertocchi; Arcangelo Dimico |
| Abstract: | The mounting evidence on the demographics of COVID-19 fatalities points to an overrepresentation of minorities and an underrepresentation of women. Using individual-level, race-disaggregated, and georeferenced death data collected by the Cook County Medical Examiner, we jointly investigate the racial and gendered impact of COVID-19, its timing, and its determinants. Through an event study approach we establish that Black individuals are affected earlier and more harshly and that the effect is drivem by Black women. Rather than comorbidity or aging, the Black female bias is associated with poverty and channeled by occupational segregation in the health care and transportation sectors and by commuting on public transport. Living arrangements and lack of health insurance are instead found uninfluential The Black female bias is spacially concentrated in neighborhoods that were subject to historical redlining. |
| Keywords: | COVID-19, deaths, race, gender, occupations, transport, redlining, Cook County, Chicago. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wchild:85&r=all |
| By: | Bertocchi, Graziella; Dimico, Arcangelo |
| Abstract: | The mounting evidence on the demographics of COVID-19 fatalities points to an overrepresentation of minorities and an underrepresentation of women. Us- ing individual-level, race-disaggregated, and georeferenced death data collected by the Cook County Medical Examiner, we jointly investigate the racial and gendered impact of COVID-19, its timing, and its determinants. Through an event study approach we establish that Blacks individuals are affected earlier and more harshly and that the effect is driven by Black women. Rather than comorbidity or aging, the Black female bias is associated with poverty and channeled by occupational seg- regation in the health care and transportation sectors and by commuting on public transport. Living arrangements and lack of health insurance are instead found un- in uential. The Black female bias is spatially concentrated in neighborhoods that were subject to historical redlining. |
| Keywords: | COVID-19,deaths,race,gender,occupations,transport,redlining,Cook County,Chicago |
| JEL: | I14 J15 J16 J21 R38 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:811&r=all |
| By: | Graziella Bertocchi (University of Modena and Reggio Emilia, EIEF, CEPR, CHILD, Dondena, GLO, and IZA); Arcangelo Dimico (Queen's University Belfast, GLO, IZA, CHaRMS, and QUCEH) |
| Abstract: | The mounting evidence on the demographics of COVID-19 fatalities points to an overrepresentation of minorities and an underrepresentation of women. Using individual-level, race-disaggregated, and georeferenced death data collected by the Cook County Medical Examiner, we jointly investigate the racial and gendered impact of COVID-19, its timing, and its determinants. Through an event study approach we establish that Blacks individuals are affected earlier and more harshly and that the effect is driven by Black women. Rather than comorbidity or aging, the Black female bias is associated with poverty and channeled by occupational segregation in the health care and transportation sectors and by commuting on public transport. Living arrangements and lack of health insurance are instead found uninfluential. The Black female bias is spatially concentrated in neighborhoods that were subject to historical redlining. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:2106&r=all |