nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒05‒10
sixteen papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Access to Care and Health Insurance Coverage for Workers with Disabilities: Outcomes by State-Level Responses to the ACA By Anna Hill; Eunhae Shin; Jody Schimmel Hyde
  2. Predicting Divertible Medicaid Emergency Department Costs By Hastings, Justine S.; Howison, Mark
  3. Design principles for agricultural risk management policies By Joseph Glauber; Katherine Baldwin; Jesús Antón; Urszula Ziebinska
  4. Selection and Behavioral Responses of Health Insurance Subsidies in the Long Run: Evidence from a Field Experiment in Ghana By Patrick Opoku Asuming; Hyuncheol Bryant Kim; Armand Sim
  5. Disability Insurance in the Great Recession: Ease of Access, Program Enrollment, and Local Hysteresis By Melissa S. Kearney; Brendan M. Price; Riley Wilson
  6. The long-run effects of risk: an equilibrium approach By Madeira, João; Palma, Nuno Pedro G.; van der Kwaak, Christiaan
  7. The Lock-in Effects of Part-time Unemployment Benefits By Benghalem, Hélène; Cahuc, Pierre; Villedieu, Pierre
  8. In Sickness and in Health: Job Displacement and Health Spillovers in Couples By Gathmann, Christina; Huttunen, Kristiina; Jenström, Laura; Sääksvuori, Lauri; Stitzing, Robin
  9. In-Kind Transfers as Insurance By Gadenne, Lucie; Norris, Sam; Singhal, Monica; Sukhtankar, Sandip
  10. Whether, When and How to Extend Unemployment Benefits: Theory and Application to COVID-19 By Mitman, Kurt; Rabinovich, Stanislav
  11. Reset required: The euro area crisis management and deposit insurance framework By Huertas, Thomas F.
  12. A nonparametric instrumental approach to endogeneity in competing risks models By Jad Beyhum; Jean-Pierre Florens; Ingrid Van Keilegom
  13. Increasing price transparency in the Dutch health care market does not affect provider choice By Husiatynski, Maciej; Klein, Tobias; Mikkers, Misja
  14. Preferential Trade Agreements as Insurance By Appelbaum, Elie; Melatos, Mark
  15. 2020 ECMI Statistical Package: key findings By Thomadakis, Apostolos
  16. Speculative and Precautionary Demand for Liquidity in Competitive Banking Markets By Dietrich, Diemo; Gehrig, Thomas

  1. By: Anna Hill; Eunhae Shin; Jody Schimmel Hyde
    Abstract: States had flexibility in their implementation of the Patient Protection and Affordable Care Act (ACA) Medicaid expansions, which may have led to variation in coverage and changes in access to care for workers with disabilities.
    Keywords: Workers, Disabilities, Affordable care act, Health insurance, Access to care
  2. By: Hastings, Justine S.; Howison, Mark
    Abstract: Lowering health care costs is a policy priority for public health insurance programs. Policies that divert Emergency Department (ED) care to less costly, more effective health services are a promising avenue for cost savings. Using comprehensive, anonymized administrative data from the State of Rhode Island, which includes Medicaid and other social insurance programs, we demonstrate how government can identify and conduct efficient outreach to Medicaid recipients at risk of becoming high-cost ED users for potentially divertible care. The top predictors from our models include age, Medicaid enrollment and eligibility factors, and prior medical procedures. Our predictive models capture more future divertible spending than existing methods for identifying ED “super-utilizers” based on multiple prior ED visits. By using comprehensive administrative data that includes all of the state’s social insurance programs, we can also establish connections between predicted high-cost ED users and existing case management in non-Medicaid programs. Policymakers could use these models to improve their identification of divertible spending and reduce the need for de novo outreach and case management programs.
    Date: 2021–04–26
  3. By: Joseph Glauber (International Food Policy Research Institute); Katherine Baldwin (OECD); Jesús Antón (OECD); Urszula Ziebinska (OECD)
    Abstract: Government support for agricultural risk management tools has grown substantially over the past two decades. While these tools can play a role in strengthening farm-level resilience by helping farmers to cope with the financial impact of adverse events, they also modify farmers’ incentives to invest in risk-reducing measures and market tools. Policy design is critical to maximise effectiveness while minimising unintended consequences. This report reviews the accumulated experience on four types of publicly-supported agricultural risk management tools (ex post disaster aid, agricultural insurance, income stabilisation schemes and tax and savings measures). It suggests some basic principles on how countries can improve the design of their agricultural risk management policies, using a holistic approach and focusing on market failures. The report also highlights the need for more transparency on basic programme data, and for periodic public evaluation of existing programmes.
    Keywords: Agricultural Insurance, Disaster aid, Resilience
    JEL: Q18 Q54 H84 G22 G32
    Date: 2021–05–10
  4. By: Patrick Opoku Asuming; Hyuncheol Bryant Kim; Armand Sim
    Abstract: We conduct a randomized experiment that varies one-time health insurance subsidy amounts (partial and full) in Ghana to study the impacts of subsidies on insurance enrollment and health care utilization. We find that both partial and full subsidies promote insurance enrollment in the long run, even after the subsidies expired. Although the long run enrollment rate and selective enrollment do not differ by subsidy level, long run health care utilization increased only for the partial subsidy group. We show that this can plausibly be explained by stronger learning-through-experience behavior in the partial than in the full subsidy group.
    Date: 2021–05
  5. By: Melissa S. Kearney; Brendan M. Price; Riley Wilson
    Abstract: Previous research has documented that Social Security Disability Insurance (SSDI) applications and awards increase during economic downturns and that expanded access to SSDI leads to a reduction in employment. We build on these insights and investigate to what extent differential access to SSDI during economic downturns leads to differential changes in SSDI enrollment and employment during the subsequent recovery. We exploit plausibly exogenous variation in SSDI appeals processing time (a measure of hassle or access) facing individuals living in ZIP codes that straddle Social Security Administration hearing office catchment borders. During the Great Recession, ZIP codes assigned to hearing offices with faster appellate processes saw a larger increase in SSDI enrollment than their cross-border neighbors. These enrollment effects are concentrated among ZIP code pairs that experienced more severe labor market downturns, and they persist as late as 2015. In the full sample, there is no clear effect of longer processing times on subsequent employment rates. However, we find some limited evidence that faster appellate processes may have weighed on the employment recovery in hard-hit ZIP codes that had high pre-recession rates of SSDI enrollment. Our findings highlight the importance of considering interaction effects between economic shocks and ease of access to the safety net.
    JEL: H53 I38 J08
    Date: 2021–04
  6. By: Madeira, João; Palma, Nuno Pedro G.; van der Kwaak, Christiaan
    Abstract: Advanced economies tend to have large but unstable intermediation sectors. We employ a DSGE model with banks featuring limited liability to investigate how risk shocks in the financial sector affect long-run macroeconomic outcomes. With full deposit insurance, banks expand balance sheets when risk increases, leading to higher investment and output. With no deposit insurance, we observe substantial drops in long-run credit provision, investment, and output. These differences provide a novel argument in favor of deposit insurance. Finally, our welfare analysis finds that increased risk reduces welfare, except when there is full deposit insurance and deadweight costs are small.
    Keywords: Costly state verification; deposit insurance; endogenous leverage; intermediation; investment; limited liability; Regulation; risk
    JEL: E22 E44 G21 O16
    Date: 2021–02
  7. By: Benghalem, Hélène; Cahuc, Pierre; Villedieu, Pierre
    Abstract: We ran a large randomized controlled experiment among about 150,000 recipients of unemployment benefits insurance in France in order to evaluate the impact of part-time unemployment benefits. We took advantage of the lack of knowledge of job seekers regarding this program and sent emails presenting the program. The information provision had a significant positive impact on the propensity to work while on claim, but reduced the unemployment exit rate, showing important lock-in effects into unemployment associated with part-time unemployment benefits. The importance of these lock-in effects implies that decreasing the marginal tax rate on earnings from work while on claim in the neighborhood of its current level does not increase labor supply and increases the expenditure net of taxes of the unemployment insurance agency.
    Keywords: Lock-in effects; Part-time unemployment benefits; Unemployment Duration; Unemployment insurance
    JEL: H5 J64 J65
    Date: 2021–03
  8. By: Gathmann, Christina; Huttunen, Kristiina; Jenström, Laura; Sääksvuori, Lauri; Stitzing, Robin
    Abstract: Using administrative labor market data matched to mortality and patient records, we document that male job displacement increases mortality for both men and his partner. For every 10,000 displaced men, there are 110 additional deaths. Of those, 60% accrue to the displaced worker but 40% are due to excess spousal mortality. We further document a stunning gender asymmetry: while male job displacement generates persistent health effects, no such dire consequences are observed after a woman's job loss. We explore four explanations for this pattern: risk sharing through spousal labor supply; earnings losses and public insurance; widowhood; and family structure.
    Date: 2021–02
  9. By: Gadenne, Lucie; Norris, Sam; Singhal, Monica; Sukhtankar, Sandip
    Abstract: Recent debates about the optimal form of social protection programs have highlighted the potential for cash as the preferred form of transfer to low income households. However, in-kind transfers remain prevalent throughout the world. We argue that beneficiaries themselves may prefer in-kind transfers because these transfers can provide insurance against price risk. Households in developing countries often face substantial price variation as a result of poorly integrated markets. We develop a model demonstrating that in-kind transfers are welfare improving relative to cash if the covariance between the marginal utility of income and price is positive. Using calorie shortfalls as a proxy for marginal utility, we find that in-kind transfers improve welfare relative to cash for Indian households, an effect driven entirely by poor households. We further show that expansions in the generosity of the Public Distribution System (PDS) - India's in-kind food transfer program - result not only in increased caloric intake but also reduced sensitivity of calories to prices.
    Keywords: cash transfers; in-kind transfers; India; price risk; Public Distribution System
    JEL: H42 H53 I38 O12 Q18
    Date: 2021–02
  10. By: Mitman, Kurt; Rabinovich, Stanislav
    Abstract: We investigate the optimal response of unemployment insurance to economic shocks, both with and without commitment. The optimal policy with commitment follows a modified Baily-Chetty formula that accounts for job search responses to future UI benefit changes. As a result, the optimal policy with commitment tends to front-load UI, unlike the optimal discretionary policy. In response to shocks intended to mimic those that induced the COVID-19 recession, we find that a large and transitory increase in UI is optimal; and that a policy rule contingent on the change in unemployment, rather than its level, is a good approximation to the optimal policy.
    Keywords: Markov perfect equilibrium; optimal policy; Unemployment insurance
    JEL: E6 H1 J65
    Date: 2021–02
  11. By: Huertas, Thomas F.
    Abstract: The crisis management and deposit insurance (CMDI) framework in the euro area requires a reset. Although its policy objectives remain valid, the means of achieving them do not. As the euro area comes the end of the long transition period taken to implement the BRRD/SRMR, it should take the opportunity to reset expectations about resolution. Above all, resolution should be for the many, not just the few. There should be a single presumptive path for dealing with failed banks: the use of bail-in to facilitate orderly liquidation under a solvent-wind down strategy. This will protect deposits and set the stage - together with the backstop that the European Stability Mechanism provides to the Single Resolution Fund (SRF) -- for the transformation of the SRF into the Single Deposit Guarantee Scheme (SDGS). To avoid forbearance, responsibility for emergency liquidity assistance (ELA) should rest, not with national central banks, but with the ECB as a single lender of last resort. Finally, national deposit guarantee schemes should function as institutional protection schemes and become investors of last resort in their member banks. Together, these measures would complete Banking Union, promote market discipline, avoid imposing additional burdens on taxpayers, help untie the doom loop between weak banks and weak governments, strengthen the euro and enhance financial stability.
    Keywords: Deposit Insurance,Crisis Management,BRRD,Resolution
    Date: 2021
  12. By: Jad Beyhum; Jean-Pierre Florens; Ingrid Van Keilegom
    Abstract: This paper discusses endogenous treatment models with duration outcomes, competing risks and random right censoring. The endogeneity issue is solved using a discrete instrumental variable. We show that the competing risks model generates a non-parametric quantile instrumental regression problem. The cause-specific cumulative incidence, the cause-specific hazard and the subdistribution hazard can be recovered from the regression function. A distinguishing feature of the model is that censoring and competing risks prevent identification at some quantiles. We characterize the set of quantiles for which exact identification is possible and give partial identification results for other quantiles. We outline an estimation procedure and discuss its properties. The finite sample performance of the estimator is evaluated through simulations. We apply the proposed method to the Health Insurance Plan of Greater New York experiment.
    Date: 2021–05
  13. By: Husiatynski, Maciej; Klein, Tobias; Mikkers, Misja
    Abstract: Price transparency is often viewed as an effective way to encourage price shopping and thereby lower health care expenditure. Using individual claims data for 6 frequent, non-emergency dermatological procedures, we estimate the short-run effect of unexpected publication of prices by a major Dutch health insurer on spending and provider choice. Visits to the price transparency website surged, but spending, the likelihood to visit a new provider, distance traveled, and type of provider visited remained unaffected.
    Keywords: healthcare demand; Price Transparency; provider choice
    JEL: I11 I13
    Date: 2021–03
  14. By: Appelbaum, Elie; Melatos, Mark
    Abstract: We investigate preferential trade agreement (PTA) formation when risk averse countries face demand uncertainty and, hence, have an insurance motive for pursuing trade integration. In this environment, when deciding which type of PTA - if any - they wish to form, countries seek to maximise their net welfare; that is, their expected utility less a risk premium. The desire for insurance influences, not just whether a particular PTA forms, but also the preferred depth of integration. We analyze the insurance implications of free trade agreements (FTAs), customs unions (CUs), and countries choosing to stand alone. We further distinguish between shallow CUs and deep CUs; in the former, members maximise the sum of their individual net welfares, while in the latter they maximise the net value of the sum of their individual expected welfares. We show that differences in country risk attitudes and the levels of risk they face, as well as the degree to which these risks are correlated with each other, each, and together, influence the formation and design of TAs. When countries’ demands are uncorrelated, they form a deep CU if their levels of risk aversion are sufficiently different. If, however, their risk attitudes are similar, countries opt for shallower trade integration - either a shallow CU or a FTA - if they face low levels of uncertainty, and choose to stand alone if one country faces a sufficiently high level of uncertainty. When countries’ demands are correlated, they tend to form a deep CU if their demands are strongly negatively correlated, a FTA if their demands are strongly positively correlated and a shallow CU when their demands are weakly correlated. Intuitively, differences in country risk attitudes (i.e., their degree of risk aversion) act as an additional source of comparative advantage. Deeper integration - particularly via a CU - permits less risk averse members to essentially export their relative partiality for risk to more risk averse partners, thereby effectively providing the latter with insurance.
    Keywords: Trade Agreement, Free Trade Area, Customs Union, Insurance, Uncertainty, Risk Premium.
    Date: 2021–04
  15. By: Thomadakis, Apostolos
    Abstract: This report provides an overview of the key findings of the ECMI Statistical Package 2020, a comprehensive and annually updated database on the dynamics of European and global capital markets (covering China, Japan, the US and other relevant markets).* The key trends gleaned from the package on equity markets, debt securities, exchange-traded derivatives (ETD), over-the-counter (OTC) derivatives and investment funds are outlined below. The statistical package covers the period up to 2019, which means that the impact of the Covid-19 pandemic is reflected in the figures only to a very limited extent. Highlights Equity market Market capitalisation of listed companies in the EU-27 increased 21.9% in 2019. The capital raised though initial public offerings (IPOs) declined 36.3% in 2019. Debt securities The global amount of outstanding debt securities in 2019 saw an increase, totalling €86.2 trillion. Notional amounts of outstanding debt in the EU-27 rose, both in terms of value (+3.5%) and GDP share (standing at 143.7%). Issuance of securitised products fell 19.6% to €217 billion in the EU-27, while in the US it increased 14.1% to €1.9 trillion. Exchange-traded derivatives The trading of interest rate derivatives (IRD) in Europe slowed (-11.2%) to €420 trillion in 2019. Global trading in commodity derivatives remained stable at €120.5 trillion, while the number of contracts reached 5.7 billion. Over-the-counter derivatives The notional amount of over-the-counter (OTC) traded derivatives increased 4.5% in 2019, and the gross market value 22.0%. Euro-denominated IRD increased 4.7% to €104 trillion, representing 26.1% of all contracts. Central clearing continued to make inroads for IRD contracts and increased 8.6%. At the end of 2019, 76.7% of IRD were cleared with central clearing counterparties (CCPs). Investments funds The number of Undertakings for Collective Investment in Transferable Securities (UCITS) funds increased 2.0% in 2019, and the number of non-UCITS funds 2.2%. Net assets totalled by UCITS funds were €8.9 trillion, while the non-UCITS reached €6.1 trillion. Equity and bond funds represented 30.0% and 24.2% of the total EU-27 investment fund market in terms of net assets. The number of listed exchange-traded funds (ETFs) in the EU-27 rose 7.7%, and the total value of ETF trading shrank 11.9%. *The ECMI Statistical Package retrieves, compiles and analyses data from publicly available sources and reports as follows. Section 1: WFE, FESE and individual trading venues; Section 2: BIS, ECB, ECBC, AFME, WFE, FESE and individual trading venues; Section 3: BIS, WFE, FESE and individual trading venues; Section 4: BIS and WFE; Section 5: EFAMA, OECD, Pensions Europe and Insurance Europe; Section 6 to 8: Eurostat, IMF and World Bank.
    Date: 2021–02
  16. By: Dietrich, Diemo; Gehrig, Thomas
    Abstract: We demonstrate that the co-existence of different motives for liquidity preferences profoundly affects the efficiency of financial intermediation. Liquidity preferences arise because consumers wish to take precautions against sudden and unforeseen expenditure needs, and because investors want to speculate on future investment opportunities. Without further frictions, the co-existence of these motives enables banks to gain efficiencies from combining liquidity insurance and credit intermediation. With standard financial frictions, banks cannot reap such economies of scope. Indeed, the co-existence of a precautionary and a speculative motive can cause efficiency losses which would not occur if there were only a single motive. Specifically, if the arrival of profitable future investment opportunities is sufficiently likely, such co-existence implies inefficient separation, pooling, or even non-existence of pure strategy equilibria. This suggests that policy implications derived solely from a single motive for liquidity demand can be futile.
    Keywords: competitive bank business models; expenditure needs; Investment opportunities; liquidity insurance; Penalty rates
    JEL: D11 D86 E21 E22 G21 L22
    Date: 2021–02

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