nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒04‒26
thirteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Optimal Deposit Insurance By Eduardo Dávila; Itay Goldstein
  2. Medicare and the Rise of American Medical Patenting: The Economics of User-Driven Innovation By Jeffrey P. Clemens; Morten Olsen
  3. Too much trade: A problem of adverse selection By de Meza, David; Reito, Francesco; Reyniers, Diane
  4. Measuring the labor market at the onset of the COVID-19 crisis By Bartik, Alexander; Bertrand, Marianne; Lin, Feng; Rothstein, Jesse; Unrath, Matthew
  5. Does social health insurance spillover to student performance? Evidence from an RDD in Peru By Miguel Ángel Carpio; Lucero Gómez; Pablo Lavado
  6. Road safety for fleets of vehicles By Dionne, Georges; Desjardins, Denise; Angers, Jean-François
  7. Medicaid and Fiscal Federalism During the COVID-19 Pandemic By Jeffrey Clemens; Benedic N. Ippolito; Stan Veuger
  8. The Insurance Value of Financial Aid By Kristy Fan; Tyler J. Fisher; Andrew A. Samwick
  9. Trajectories of Healthcare Services for Elder Persons - A Retrospective Study in Sherbrooke, Quebec By Lourdes Zubieta; Michel Raîche; Pauline Gervais; Réjean Hébert
  10. The effect of labor market shocks on mental health outcomes: evidence from the Spanish Great Recession By Eduardo Ignacio Polo-Muro
  11. Inter-cohort risk sharing with long-term guarantees: Evidence from German participating contracts By Hombert, Johan; Möhlmann, Axel; Weiß, Matthias
  12. On robustness of average inflation targeting By Honkapohja, Seppo; McClung, Nigel
  13. Trends in Employer-Sponsored Retirement Plan Access and Participation Rates: Reconciling Different Data Sources By Teresa Ghilarducci; Siavash Radpour; Michael Papadopoulos

  1. By: Eduardo Dávila; Itay Goldstein
    Abstract: This paper studies the optimal determination of deposit insurance when bank runs are possible. We show that the welfare impact of changes in the level of deposit insurance coverage can be generally expressed in terms of a small number of sufficient statistics, which include the level of losses in specific scenarios and the probability of bank failure. We characterize the wedges that determine the optimal ex-ante regulation, which map to asset- and liability-side regulation. We demonstrate how to employ our framework in an application to the most recent change in coverage, which took place in 2008.
    JEL: G01 G21 G28
    Date: 2021–04
  2. By: Jeffrey P. Clemens; Morten Olsen
    Abstract: Innovation is part idea generation and part development. We build a model of “innovating-by-doing,” whereby ideas come to practitioners. Successful innovation requires that practitioners’ ideas be developed through costly effort. Our model nests existing theories of laboratory research and learning-by-doing. Empirically, we analyze the effect of the U.S. Medicare program on medical equipment innovation. Our model’s structure allows us to infer the Medicare program’s aggregate effects. We estimate that Medicare’s introduction led to a 20 to 30 percent increase in medical equipment patenting across the United States, of which roughly half is due to the innovating-by-doing channel.
    Keywords: innovation and invention, medical innovation, health care, health insurance
    JEL: I13 O38 O31 H51
    Date: 2021
  3. By: de Meza, David; Reito, Francesco; Reyniers, Diane
    Abstract: It is shown that uni-dimensional adverse selection may result in market expansion beyond the full-information level. Although bad types tend to drive out good, enough good types may remain to draw in excessive numbers of bad types. As a result, the welfare loss from adverse selection is potentially underestimated. Applications are made to insurance, credit and the used car market.
    Keywords: asymmetric information; adverse selection; welfare.
    JEL: D61 D81 D82
    Date: 2021–03–08
  4. By: Bartik, Alexander; Bertrand, Marianne; Lin, Feng; Rothstein, Jesse; Unrath, Matthew
    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. This work has been supported, in part, by the University of California Multicampus Research Programs and Initiatives grant MRP-19-600774.
    Keywords: Social and Behavioral Sciences, MRPI Grant MRP-19-600774
    Date: 2020–08–01
  5. By: Miguel Ángel Carpio (Universidad de Piura); Lucero Gómez (Universidad del Pacífico); Pablo Lavado (Universidad del Pacífico)
    Abstract: The literature on the effects of Social Health Insurance focuses on its stated goals, namely health status and financial protection; but little work exists on its effect on education. In this paper, we examine the effect of the Peruvian program on student performance by means of a sharp regression discontinuity design. We use a unique individual-level database built from the merger of detailed data from a household survey and standardized test scores from a national census. We find large effects of health insurance on mathematics and reading scores. Moreover, we analyze the main potential mechanisms: health of child, health of family members, and status of household finances. The clearest channel is a lower incidence of anemia among children and mothers, probably due to better nutrition. Finally, we explore whether the effect of health insurance on test scores is heterogeneous by sex to the extent that the data allow. We find it is mostly driven by girls who are better off across the entire score distribution.
    Keywords: social health insurance, test scores, anemia, Peru.
    JEL: D04 I18 I21 I38
    Date: 2021–01
  6. By: Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Desjardins, Denise (HEC Montreal, Canada Research Chair in Risk Management); Angers, Jean-François (University of Montreal)
    Abstract: Road safety for fleets of vehicles has been neglected in the insurance literature, mainly because appropriate data is not available. This paper makes a threefold contribution: 1) Produce statistics on current fleets’ road safety offences using a panel of 20 years of data on truck fleets; 2) relate these offences to fleets’ accidents; and 3) identify and classify the riskiest fleets for insurance ratemaking based on past experience in managing road safety. Our results show a substantial heterogeneity between fleets in terms of road safety.
    Keywords: Road safety; truck fleets; professional drivers; road safety infractions; road safety policy; zero-inflated model; negative binomial model
    JEL: D81 G22
    Date: 2021–04–12
  7. By: Jeffrey Clemens; Benedic N. Ippolito; Stan Veuger
    Abstract: We analyze the effects of the COVID-19 pandemic on state and local government finances, with an emphasis on health spending needs and the role of the Medicaid program. We arrive at three conclusions. First, we find that nationwide, and over the entirety of the federal budget window, the enhanced federal matching funds are of roughly the same magnitude as expected increases in state Medicaid costs. There is a difference in timing, however, as projected relief funds are more concentrated in the near term than projected spending needs. Second, we show that there is substantial variation in states’ exposure to increases in Medicaid program costs. Third, we evaluate the extent to which federal aid has been targeted at states with large increases in Medicaid costs. We show that the enhanced Medicaid matching funds are quite weakly correlated with variations in states’ cost increases. In contrast, the state aid formula in the American Recovery Plan Act appears, to at least a moderate degree, to direct dollars toward states with large increases in their Medicaid enrollments.
    JEL: H72 H75 H77
    Date: 2021–04
  8. By: Kristy Fan; Tyler J. Fisher; Andrew A. Samwick
    Abstract: Financial aid programs enable students from families with fewer financial resources to pay less to attend college than other students from families with greater financial resources. When income is uncertain, a means-tested financial aid formula that requires more of an Expected Family Contribution (EFC) when income and assets are high and less of an EFC when income and assets are low provides insurance against that uncertainty. Using a stochastic, life-cycle model of consumption and labor supply, we show that the insurance value of financial aid is substantial. Across a range of parameterizations, we calculate that financial aid would have to increase by enough to reduce the net cost of attendance by 30 to 80 percent to compensate families for the loss of the income- and asset-contingent elements of the current formula. This compensating variation is net of the negative welfare consequences of the disincentives to work and save inherent in the means-testing of financial aid. Replacing just the "financial aid tax" on assets with a lump sum would also reduce welfare.
    JEL: D15 G52 I22
    Date: 2021–04
  9. By: Lourdes Zubieta; Michel Raîche; Pauline Gervais; Réjean Hébert
    Abstract: This is a longitudinal study using health administrative data of a cohort of 65+ adults, living in the city of Sherbrooke, Quebec, Canada from Jan 2011 to Dec 2015. We merged five databases including all individual visits to emergency room (ER), hospitalisations (CH), geriatric wards, admissions to intermediate and long term care (IC, LTC) facilities, and home care (HC) services. The objectives of this study were: 1) to provide a 5-year portrait of the use of health services of the 65+ population in the city of Sherbrooke, Quebec, 2) to identify the most common trajectories followed by elder patients over five years, and 3) to gather evidence on the relationship between the intensity of HC and further ER visits and hospitalisations. The cohort of services’ users represents 59% of Sherbrooke’s 65+ population. The most frequent trajectory found was ER and CH, which speaks of a health care system hospital - centered. The majority of deaths occurred during a hospital stay (CH, ~55%) or in a long-term care facility (LTC, ~28%). We also found 1 652 (8.4%) admissions to LTC facilities, with 43% of them coming straight from a hospital for an average of one month before LTC admission. Individuals having received at least one home care visit represent 34% of the original cohort and generated 52% of services excluding home care. Data visualisation diagrams indicate that earlier HC visits were followed by less ER visits and even less hospitalisations, when compared with users receiving HC later on our study interval. Finally, we found an important reduction of home care services, mainly for those users with high intensity of services; this fact underlines the system’s inability to refocus health care services on home care.
    Keywords: Healthcare,User Trajectories,Home Care,Data Visualisation,
    Date: 2021–04–16
  10. By: Eduardo Ignacio Polo-Muro (Department of Economics. Universidad Pablo de Olavide.)
    Abstract: This research examines the response in terms of demand for mental health care when individuals face a negative economic shock that impairs mental health. It exploits the sudden increase of the unemployment rate in Spain during the period 2007-2009 to analyze the long-run consequences of the labor market deterioration caused by the Great Recession on mental health. First, I analyze the impairment of self-evaluated mental health as a consequence of the Great Recession and if it prevails during the economic recovery. In addition, I estimate if the effect on self-reported mental health is reflected in the demand for mental health care. The results indicate that individuals displaced from their jobs are more likely to report worse mental health, to take drugs for mental illness, and to visit a mental health specialist. Using a labor market shock at the aggregate level, the findings from a differences-in-differences design show that the economic downturn increases the differences between employed and unemployed individuals in self-evaluated mental health. However, a recession reduces the prescription of mental health drugs, and the effect on medical attendance is insignificant. The opposite evidence regarding self-evaluated mental health and medical behavior might suggest the presence of a stigma associated with mental health.
    Keywords: Mental health, Health Care, Unemployment, Great Recession
    JEL: I12 I14 I18 J60
    Date: 2021
  11. By: Hombert, Johan; Möhlmann, Axel; Weiß, Matthias
    Abstract: Long-term minimum return guarantees sold by European life insurers increasingly become binding as interest rates decline. While participating contracts embedding these guarantees are designed to share market risk across investor cohorts when guarantees are not binding, we study how binding guarantees distort inter-cohort risk sharing. Using regulatory data on participating contracts in Germany, we find that binding guarantees reduced inter-cohort transfer by 10 basis points per year in the period 2000{2018. This is modest compared to the average transfer, which is in the range of 40{150 basis points. However, the effect is concentrated in the recent period of ultra-low interest rates and may grow larger if interest rates remain persistently low.
    Keywords: Life insurers,Participating contracts,Long-term investment,Inter-cohort risk sharing,Minimum return guarantees
    JEL: G22 G52
    Date: 2021
  12. By: Honkapohja, Seppo; McClung, Nigel
    Abstract: This paper considers the performance of average inflation targeting (AIT) policy in a New Keynesian model with adaptive learning agents. Our analysis raises concerns regarding robustness of AIT when agents have imperfect knowledge. In particular, the target steady state can be locally unstable under learning if details about the policy are not publicly available. Near the low steady state with interest rates at the zero lower bound, AIT does not necessarily outperform a standard inflation targeting policy. Policymakers can improve outcomes under AIT by (i) targeting a discounted average of inflation, or (ii) communicating the data window for the target.
    JEL: E31 E52 E58
    Date: 2021–04–21
  13. By: Teresa Ghilarducci; Siavash Radpour; Michael Papadopoulos (Schwartz Center for Economic Policy Analysis (SCEPA))
    Abstract: Analysts and representatives of the news media often get confused about American workers’ retirement plan coverage due to the complexities behind multiple data sources. Namely, differing methodologies used by each source report different results. This research note updates previous attempts1 to explain the data differences and reports trends between 2000 and 2020 in two measures of employer-sponsored retirement plan coverage: access rate (the share of workers who are offered a retirement plan at work and are eligible to participate in them) and participation rate (the share of all workers who are participating in retirement plans offered at work). We also break down retirement plan access and participation rates by race, gender, and socio-economic status to report disparities in coverage.
    Keywords: older workers, recession, COVID-19, coronavirus, downward mobility, poverty, unemployment, wages, involuntary retirement, retirement, 401k, Medicare, Older Workers Bureau, racial disparities, disparities, inequality, coverage, retirement coverage
    JEL: E24 J30 J38 J60 J88 J58
    Date: 2021–01

This nep-ias issue is ©2021 by Soumitra K. Mallick. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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