nep-ias New Economics Papers
on Insurance Economics
Issue of 2021‒06‒14
eleven papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Optimal Long-Term Health Insurance Contracts: Characterization, Computation, and Welfare Effects By Soheil Ghili; Ben Handel; Igal Hendel; Michael D. Whinston
  2. Survivors Benefits and Conjugal Behavior. Evidence from the Netherlands By Julie Tréguier; Simon Rabaté
  3. Impact of Mutual Health Insurance on Urban Households Health Expenses and Vulnerability in Burkina Faso By Koloma, Yaya
  4. UI Generosity and Job Acceptance: Effects of the 2020 CARES Act By Nicolas Petrosky-Nadeau; Robert G. Valletta
  5. Temporal Instability of Risk Preference among the Poor: Evidence from Payday Cycles By Mike Akesaka; Peter Eibich; Chie Hanaoka; Hitoshi Shigeoka
  6. The Income Protection Role of an EMUWide Unemployment Insurance System: the Case of Atypical Workers By Jara Tamayo, Holguer Xavier; Simon, Agathe
  7. Involuntary job loss: Welfare effects, earnings impacts, and policy options. By Isabelle Sin; Dean Hyslop; Dave Maré; Shakked Noy
  8. On the design of labor market programs as stabilization policies By Euiyoung Jung
  9. Asymmetric Demand Response when Prices Increase and Decrease: The Case of Child Healthcare By Toshiaki Iizuka; Hitoshi Shigeoka
  10. Is Zero a Special Price? Evidence from Child Healthcare By Toshiaki Iizuka; Hitoshi Shigeoka
  11. The Effect of Involuntary Retirement on Healthcare Use and Health Status By Anikó Bíró; Réka Branyiczki; Péter Elek

  1. By: Soheil Ghili (Cowles Foundation, Yale University); Ben Handel (Department of Economics, UC Berkeley); Igal Hendel (Department of Economics, Northwestern University); Michael D. Whinston (Department of Economics and Sloan School of Management, M.I.T)
    Abstract: Reclassiï¬ cation risk is a major concern in health insurance where contracts are typically one year in length but health shocks often persist for much longer. While most health systems with private insurers emphasize short-run contracts paired with substantial pricing regulations to reduce reclassiï¬ cation risk, long-term contracts with one-sided insurer commitment have signiï¬ cant potential to reduce reclassiï¬ cation risk without the negative side effects of price regulation, such as adverse selection. In this paper, we theoretically characterize optimal long-term insurance contracts with one-sided commitment, extending prior models of this form in several key directions that are important for studying health insurance markets. We leverage this characterization to provide a simple algorithm for computing optimal contracts from primitives. We estimate key market fundamentals using data on all under-65 privately insured consumers in Utah and pair these estimates with our model to study comparative statics related to contract design and welfare. We ï¬ nd that the welfare value of a system that effectively implements these long-term contracts depends crucially on (i) the degree of public insurance pre-system health risk (ii) the distribution of expected lifetime income gradients in the population (iii) the stochastic process governing life-cycle health shocks (iv) the extent of consumer switching costs and (v) the degree of consumer myopia.
    JEL: L5 I1 D0
    Date: 2019–12
  2. By: Julie Tréguier; Simon Rabaté
    Abstract: This paper investigates the impact of survivors insurance on marital behavior. We study the 1996 Dutch reform which considerably tightened eligibility rules to survivors' benefits. Exploiting a discontinuity in date of birth eligibility to survivors insurance and using a rich and exhaustive Dutch population administrative dataset, we carry out a regression discontinuity design and we find no evidence of the reform on divorce probability. Exploring possible explanations for our zero-effect result, we study how labor supply responses can compensate the income drop the reform induced. We find a strong increase in the labor force participation of widows after the reform. However this response does not completely offset the decrease in income generated form the cut in survivors benefits.
    Keywords: divorce, marriage dissolution, survivor benefits, labor supply, income effect, unearned income
    JEL: H31 J12 I38 J22 J48
    Date: 2021
  3. By: Koloma, Yaya
    Abstract: The objective of this paper is to assess the effects of long-term participation in a mutual health insurance programme on urban households health expenses and vulnerability in Burkina Faso. With data collected in 2013 from a series of interviews with beneficiaries of two mutual health insurance, the study performs a descriptive approach and an econometric technique (propensity score matching). The mutual health insurance program is highly valued, with 90.7% of short term (STB) and 98.3% long-term (LTB) beneficiaries willing to renew their policy insurance. They considered mutual health insurance schemes to be a good mechanism for covering disease risks, as 63.5% of STB and 79.3% of LTB were ready to take out insurance with another company if their mutual insurance no longer offered it. With a higher vulnerability incidence among STB (48.2%) compared to LTB (41.4%), access to mutual health insurance services seems to have a different impact on the well-being of beneficiary households. Indeed, long-term participation in a mutual health insurance has a positive impact on reducing household health expenses (ATT=0.185; t = 2.152**) and no statistically significant effect on their vulnerability (ATT=0.002; t=0.022). More efforts should be made to improve its effect on vulnerability, especially for the poorest.
    Keywords: Mutual Health Insurance,Vulnerability,Households,Impact,Burkina Faso
    Date: 2021
  4. By: Nicolas Petrosky-Nadeau; Robert G. Valletta
    Abstract: To provide relief to the U.S. labor market following the onset of the COVID-19 pandemic, the CARES Act granted an extra $600 per week in UI benefit payments from late March through July 2020. This unprecedented increase in UI generosity raised concern that UI recipients would be largely unwilling to accept job offers, slowing the labor market recovery. Job acceptance decisions weigh the value of a job against remaining unemployed. A reservation level of benefit payments exists in this dynamic decision problem at which an individual is indifferent between accepting and refusing an offer. This reservation benefit is a simple statistic summarizing the decision problem conditional on the perceived state of the labor market and the weeks of Unemployment Insurance (UI) compensation remaining. Estimating the reservation benefit for a wide range of US workers suggests few would turn down an offer to return to work at the previous wage under the CARES Act expanded UI payments. Direct empirical analysis of labor force transitions using matched Current Population Survey (CPS) data, linked to annual earning records from the CPS income supplement to form UI replacement rates, shows moderate disincentive effects of the $600 supplemental payments on job finding rates; this empirical framework also suggests small effects of the $300 weekly UI supplement available during 2021
    Keywords: Unemployment; unemployment insurance; job acceptance; COVID-19; CARES Act
    JEL: J64 J65
    Date: 2021–05–17
  5. By: Mike Akesaka (Osaka University); Peter Eibich (Max Planck Institute for Demographic Research); Chie Hanaoka (Toyo University); Hitoshi Shigeoka (Simon Fraser University and NBER)
    Abstract: The poor live paycheck to paycheck and are repeatedly exposed to strong cyclical income fluctuations. We investigate whether such income fluctuations affect risk preference among the poor. If risk preference temporarily changes around payday, optimal decisions made before payday may no longer be optimal afterward, which could reinforce poverty. By exploiting Social Security payday cycles in the US, we find that risk preference among the poor relying heavily on Social Security changes around payday. Rather than cognitive decline before payday, the deterioration of mental health and relative deprivation may play a role. We find similar evidence among the Japanese elderly.
    Keywords: poverty, risk preference, Social Security, mental health, relative deprivation, elderly, Health and Retirement Survey, Japanese Study of Aging and Retirement
    JEL: D81 D91 I32
    Date: 2021–06
  6. By: Jara Tamayo, Holguer Xavier; Simon, Agathe
    Abstract: This paper evaluates the potential of a common unemployment insurance system for the Economic and Monetary Union (EMU-UI) to improve income protection of atypical workers, namely those in part-time and temporary contracts. We use EUROMOD, the European tax-benefit microsimulation model, to simulate entitlements to national and EMU-UI and assess their effects on the household disposable income of atypical workers in the event of unemployment. Our results show that there are sizable gaps in the coverage of national UI schemes between countries, with atypical workers having particularly low coverage rates. The introduction of an EMU-UI would reduce coverage gaps and increase net replacement rates, especially for atypical workers, and would protect a large share of the workforce against the risk of poverty. Extending eligibility for the EMU-UI to the self-employed would further improve income protection, reducing their risk of falling into poverty in the event of unemployment.
    Date: 2021–05–25
  7. By: Isabelle Sin (Motu Economic and Public Policy Research); Dean Hyslop (Motu Economic and Public Policy Research); Dave Maré (Motu Economic and Public Policy Research); Shakked Noy (Motu Economic and Public Policy Research)
    Abstract: Workers who experience involuntary job loss suffer from deep and persistent negative consequences. In this paper, we first summarise the evidence on the effects of involuntary job loss on displaced workers’ wellbeing. We conclude that displacement harms workers’ mental health and economic security in the short term and negatively affects their earnings and mortality risk in the long term. We then extrapolate the estimates of Hyslop and Townsend (2017) to estimate the economy-wide net-present value of wages lost as a result of displacement by the workers displaced in New Zealand in a representative year. Our estimates suggest that this value is likely between $3.3 billion (in a year of economic upswing) and $15.4 billion (in a year of very severe economic downswing). Finally, we survey the policy options available for dealing with involuntary displacement. We conclude that unemployment insurance or unemployment benefits can effectively mitigate the immediate negative effects of displacement and have only small downsides. By contrast, training and job placement programs are typically ineffective, but in some circumstances might have high potential upside.
    Keywords: Displaced workers, unemployment insurance, active labour market policies
    JEL: J08 J24 J63
    Date: 2021–06
  8. By: Euiyoung Jung (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: This paper analyzes the optimal cyclical behavior of labor market policies in an economy with asset and labor market frictions. The policies of interest include unemployment insurance (UI) and employment protection (EP). In addition to their supply-side effects, labor market policies affect the aggregate demand via earning risk and redistribution channels. Under bilateral wage bargaining, I find that procyclical UI and countercyclical EP deliver superior welfare outcomes through stabilization via both supply and demand channels.
    Keywords: new keynesian,uncertainty,unemployment,incomplete markets,labor market policy New Keynesian,Uncertainty,Unemployment,Incomplete markets,Labor market policy JEL Classification: E12,E21,E24,E29,E32,E61,E69,J68,J65
    Date: 2021–05
  9. By: Toshiaki Iizuka (The University of Tokyo); Hitoshi Shigeoka (Simon Fraser University and NBER)
    Abstract: This study tests whether demand responds symmetrically to price increases and decreases—a seemingly obvious proposition under conventional demand theory that has not been rigorously tested. Exploiting rapid expansion in municipal subsidies for child healthcare in a difference-in-differences framework, we find evidence against it: when coinsurance, our price measure, increases from 0% to 30%, the demand response is more than twice that to a price decrease from 30% to 0%. This result indicates that, while economists and policymakers pay little attention, the price change direction matters, and that welfare analysis should incorporate this direction.
    Keywords: Asymmetric demand Response, Patient Cost-Sharing, Child Healthcare, Conventional Demand Theory
    JEL: I18 I13 I11 J13
    Date: 2021–06
  10. By: Toshiaki Iizuka (The University of Tokyo); Hitoshi Shigeoka (Simon Fraser University and NBER)
    Abstract: Do consumers react differently to zero prices? We test the presence of a zero-price effect in child healthcare and find that a zero price is indeed special and it boosts demand discontinuously. A zero price affects resource allocations by encouraging healthier children to use more services and exacerbates behavioral hazard by increasing inappropriate use of antibiotics. A copayment, as small as 2USD per visit, alleviates these problems without increasing financial and health risks. However, a zero price may be used to boost demand for highly cost-effective treatments. Strategically choosing zero and non-zero prices is a key to improving welfare.
    Keywords: Zero-price Effects, Patient Cost-Sharing, Children, Healthcare Utilization, Price Elasticity, Moral Hazard
    JEL: I18 I13 I11 J13
    Date: 2021–06
  11. By: Anikó Bíró (Health and Population Lendület Research Group, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4.); Réka Branyiczki (Central European University and TÁRKI); Péter Elek (Health and Population Lendület Research Group, Centre for Economic and Regional Studies, 1097 Budapest, Tóth Kálmán u. 4. and Institute of Economics, Corvinus University of Budapest)
    Abstract: We analyse the causal effect of involuntary retirement on detailed indicators of healthcare use and health status. Our identification strategy is based on a pension reform in Hungary which forced public sector workers above the statutory retirement age to full time retirement. Using rich administrative data, we find that on the three-year horizon, involuntary retirement decreases the number of primary care doctor visits, the consumption of antiinfectives for systemic use and drugs of the respiratory system, and the non-zero spending on antiinfectives, the drugs of the alimentary tract and metabolism and of the cardiovascular system. We also find that the impact on the latter two drug categories is driven by the drop in income due to involuntary retirement. The effects of involuntary retirement are comparable to the short-run effects of voluntary retirement, identified from a change in the statutory retirement age. We conclude that there is little evidence for health deteriorating effects of involuntary retirement and provide explanations for the possible mechanisms behind our results.
    Keywords: healthcare use, involuntary retirement, voluntary retirement
    JEL: I10 J26
    Date: 2021–05

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