nep-ias New Economics Papers
on Insurance Economics
Issue of 2022‒03‒28
eight papers chosen by
Soumitra K. Mallick
Indian Institute of Social Welfare and Business Management

  1. Health Insurance for India's Missing Middle By Sarwal, Rakesh; Kumar, Anurag
  2. Risk Appetite Fluctuations in the Insurance Industry By Elisa Luciano; Jean Charles Rochet
  3. Household Income, Liquidity, and Optimal Unemployment Insurance By Stéphane Auray; David L. Fuller; Nicolas Lepage-Saucier
  4. Two decades of Tanzanian health policy: Examining policy developments and opportunities through a gender lens By Roosa Lambin; Milla Nyyssölä
  5. Inverse Selection By Markus Brunnermeier; Rohit Lamba; Carlos Segura-Rodriguez
  6. Shadow banking and the four pillars of traditional financial intermediation By Emmanuel Farhi; Jean Tirole
  7. Banks' Capital Structure Determinants: A Comparative Analysis Between Islamic and Conventional Banks based on Corporate and Regulatory Approaches By Kaouther Toumi
  8. Why women work the way they do in Japan: Roles of fiscal policies By Sagiri Kitao; Minamo Mikoshiba

  1. By: Sarwal, Rakesh; Kumar, Anurag
    Abstract: Policy paper on increasing health insurance coverage for India's missing middle population
    Date: 2021–10–27
  2. By: Elisa Luciano; Jean Charles Rochet
    Abstract: The risk appetite of insurance companies fluctuates over time in a quasi cyclical fashion. When their capitalization is high (low), companies choose portfolios with a high (small) share of risky assets. We show that this phenomenon may have the same source as the un derwriting cycle, namely recapitalization costs. We build a simple dynamic model of the insurance sector where financial frictions prevent companies from maintaining a target leverage. Portfolio decisions of insurers fluctuate with their aggregate capitalization. The model rationalizes two apparently disjoint pieces of evidence: long-standing empirical evidence on underwriting cycles and more recent evidence on the fluctuations of insurance companies’ risk appetite
    Keywords: endogenous risk appetite, macro finance, insurance cycles, insurance asset allocation
    Date: 2021
  3. By: Stéphane Auray (CREST-Ensai and ULCO, France); David L. Fuller (University of Wisconsin-Oshkosh, USA); Nicolas Lepage-Saucier (Toulouse School of Economics, France)
    Abstract: We examine the optimal provision of unemployment insurance (UI) benefits in a directed search model with matching frictions. Workers have differing levels of liquidity to smooth consumption during an unemployment spell. The model allows workers to choose between paying a fixed cost to collect the government provided UI benefits, or to forgo this scheme. Non-collectors do not receive liquid UI benefits, but do experience a shorter expected unemployment duration. Using data from the SIPP and a Mixed Proportional Hazard (MPH) model, we estimate jointly the decision to collect UI benefits and the risk of going back to work, which yields several novel results with policy implications. Households with lower liquidity are less likely to opt into the government UI scheme, as the need to find a job quickly outweighs the short-lived liquidity provided by UI benefits. The MPH estimation also finds that collecting benefits significantly lengthens the duration of unemployment. The model is calibrated to the empirical results. The optimal policy in the calibrated economy features a relatively high replacement rate and short potential duration.
    Keywords: unemployment insurance, liquidity, moral hazard, search, calibration
    JEL: E61 J32 J64 J65
    Date: 2021–09–17
  4. By: Roosa Lambin; Milla Nyyssölä
    Abstract: Tanzania has undertaken important health sector reforms in the new millennium, and the most recent Health Sector Strategic Plan (2021-26) lays out ambitious targets to achieve universal health coverage. Yet, women in Tanzania continue to face significant barriers in accessing healthcare and the country is grappling with important gender-biased health challenges disadvantaging women. The aims of this paper are two-fold.
    Keywords: Tanzania, Women, Health, Policy, Financial protection, Health insurance, Healthcare access
    Date: 2022
  5. By: Markus Brunnermeier (Princeton University); Rohit Lamba (Pennsylvania State University); Carlos Segura-Rodriguez (Banco Central de Costa Rica)
    Abstract: Big data, machine learning and AI inverts adverse selection problems. It allows insurers to infer statistical information and thereby reverses information advantage from the insuree to the insurer. In a setting with two-dimensional type space whose correlation can be inferred with big data we derive three results: First, a novel tradeoff between a belief gap and price discrimination emerges. The insurer tries to protect its statistical information by offering only a few screening contracts. Second, we show that forcing the insurance company to reveal its statistical information can be welfare improving. Third, we show in a setting with naive agents that do not perfectly infer statistical information from the price of offered contracts, price discrimination significantly boosts insurer’s profits. We also discuss the significance our analysis through three stylized facts: the rise of data brokers, the importance of consumer activism and regulatory forbearance, and merits of a public data repository.
    Keywords: Insurance, Big Data, Informed Principal, Belief Gap, Price Discrimination
    JEL: G22 D82 D86 C55
    Date: 2020–04
  6. By: Emmanuel Farhi (Harvard University [Cambridge], NBER - National Bureau of Economic Research [New York] - NBER - The National Bureau of Economic Research); Jean Tirole (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IAST - Institute for Advanced Study in Toulouse)
    Abstract: Traditional banking is built on four pillars: SME lending, insured deposit taking, access to lender of last resort, and prudential supervision. This paper unveils the logic of the quadrilogy by showing that it emerges naturally as an equilibrium outcome in a game between banks and the government. A key insight is that regulation and public insurance services (LOLR, deposit insurance) are complementary. The model also shows how prudential regulation must adjust to the emergence of shadow banking, and rationalizes structural remedies to counter bogus liquidity hoarding and financial contagion: ring-fencing between regulated and shadow banking and the sharing of liquidity in centralized platforms.
    Keywords: Narrow banks,CCPs,Ring-fencing,Migration,Supervision,Deposit insurance,Lender of last resort,Retail and shadow banks
    Date: 2021–11
  7. By: Kaouther Toumi (LGCO - Laboratoire Gouvernance et Contrôle Organisationnel - UT3 - Université Toulouse III - Paul Sabatier - Université Fédérale Toulouse Midi-Pyrénées)
    Abstract: The research aims to empirically investigate the banks' capital structure determinants by considering 386 listed and unlisted banks categorized into 74 IBs, 256 CBs, and 56 HBs from 20 countries for 2008-2016 based on corporate and regulatory approaches. The main findings are interesting. From a corporate approach, we find differences between IBs, CBs and HBs regarding the determinants of their capital structure which offer an empirical confirmation of the reduced information asymmetry in an Islamic finance context. From a regulatory approach, the findings show similarities regarding the negative impact of deposit insurance schemes on the regulatory capital for all types of banks. When focusing on IBs, we evidence that banks subject to Shari'ah-compliant deposit insurance schemes hold lower capital than those subject to conventional deposit insurance schemes.
    Keywords: Islamic ethics,Banks,Corporate finance theories,Regulation,Financial decision
    Date: 2021
  8. By: Sagiri Kitao; Minamo Mikoshiba
    Abstract: Women work less often and earn significantly less than men in Japan. We use panel data to investigate employment and earnings dynamics of single and married women over the life-cycle and build a structural model to study the roles of fiscal policies in accounting for their behavior. We show that eliminating spousal deductions, social insurance premium exemptions and survivors’ pension benefits for low-income spouses would significantly raise the labor supply of women and their earnings. More women would opt for regular jobs rather than contingent jobs, accumulate more human capital, and enjoy higher income growth. The government would earn higher net revenues and there is a welfare gain when additional taxes are transferred back.
    Keywords: Female labor force participation, life-cycle, human capital accumulation, spousal deductions and exemptions, survivors’ benefits, two-tiered employment system, Japan
    JEL: D15 H2 H31 J22 J24
    Date: 2022–03

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