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on Insurance Economics |
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Issue of 2021‒05‒24
sixteen papers chosen by Soumitra K. Mallick Indian Institute of Social Welfare and Business Management |
| By: | Debra Lipson; Laura Kimmey; Danielle Chelminsky; Caroline Margiotta; Alena Tourtellotte; Erin Weir Lakhmani |
| Abstract: | This study examined factors affecting voluntary disenrollment by beneficiaries enrolled in Medicare Advantage Dual Eligible Special Needs Plans, focusing on quality and member experience scores, Medicaid integration level, state Medicaid policies, and local market dynamics. |
| Keywords: | Dually eligible beneficiaries, integrated care, Medicare Advantage, Dual eligible Special Needs Plans, voluntary disenrollment |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:da9ea9f4e07a4ef3bd4da46ee4bddd38&r= |
| By: | Canta, Chiara; Cremer, Helmuth |
| Abstract: | We study the design of social long-term care (LTC) insurance when informal care is exchange-based. Parents do not observe their children's cost of providing care, which is continuously distributed over some interval. They choose a rule specifying transfers that are conditional on the level of informal care. Social LTC insurance is designed to maximize a weighted sum of parents' and children's utility. The optimal uniform public LTC insurance can fully cover the risk of dependence but parents continue to bear the risk of having children with a high cost of providing care. A nonlinear policy conditioning LTC benefits on transfers provides full insurance even for this risk. Informal care increases with the children's welfare weight. Our theoretical analysis is completed by numerical solutions based on a calibrated example. In the uniform case, public care should represent up to 40% of total care but its share decreases to about 30% as the weight of children increases. In the nonlinear case, public care increases with the children's cost of providing care at a faster rate when children's weight in social welfare is higher. It represents 100% of total care for the families with high-cost children. |
| Keywords: | asymmetric information; informal care; Long-term care; Strategic bequests |
| JEL: | H2 H5 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15421&r= |
| By: | Claudia Ceci; Katia Colaneri; Alessandra Cretarola |
| Abstract: | We study optimal proportional reinsurance and investment strategies for an insurance company which experiences both ordinary and catastrophic claims and wishes to maximize the expected exponential utility of its terminal wealth. We propose a model where the insurance framework is affected by environmental factors, and aggregate claims and stock prices are subject to common shocks, i.e. drastic events such as earthquakes, extreme weather conditions, or even pandemics, that have an immediate impact on the financial market and simultaneously induce insurance claims. Using the classical stochastic control approach based on the Hamilton-Jacobi-Bellman equation, we provide a verification result for the value function via classical solutions to two backward partial differential equations and characterize the optimal reinsurance and investment strategies. Finally, we make a comparison analysis to discuss the effect of common shock dependence. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.07524&r= |
| By: | Hendren, Nathaniel; Landais, Camille; Spinnewijn, Johannes |
| Abstract: | Should choice be offered in social insurance programs? The paper presents a conceptual framework that identifies the key forces determining the value of offering choice, reviews some existing evidence on these forces, and aims to guide further empirical research in different insurance domains. The value of offering choice is higher the larger the variation in individual valuations, but gets reduced by both selection on risk and selection on moral hazard. The implementation of choice-based policies is further challenged by the presence of adverse selection and choice frictions or the obligation to offer basic uncompensated care. These inefficiencies can be seen as externalities, which do not rationalize the absence of providing choice per se, but point to the need for regulatory policies and the potential value of corrective pricing à la Pigou. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15285&r= |
| By: | Boone, Jan |
| Abstract: | This paper shows that it is possible for intermediate goods to be priced above the value that the good has for final consumers. This happens in sectors selling to adverse selection markets where the cost difference between consumer types is dominated by their elasticity difference. High input prices then help to separate consumer types. An increase in competition can raise prices further. We use the example of pharmaceutical companies selling drugs to a health insurance market at prices exceeding value. Another feature of the model is an excessive private incentive to reduce market size, e.g. in the form of personalized medicine. |
| Keywords: | Adverse Selection; pharmaceutical prices; pricing above value; risk equalization; Vertical Relations |
| JEL: | I11 I13 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15279&r= |
| By: | Anna Werbeck; Ansgar Wübker; Nicolas R. Ziebarth |
| Abstract: | Using a randomized field experiment, we show that health care specialists cream-skim patients by their expected profitability. In the German two-tier system, outpatient reimbursement rates for both public and private insurance are centrally determined but are significantly higher for the privately insured. In our field experiment, following a standardized protocol, the same hypothetical patient called 991 private practices in 36 German counties to schedule appointments for allergy tests, hearing tests and gastroscopies. Practices were 4% more likely to offer an appointment to the privately insured. Conditional on being offered an appointment, wait times for the publicly insured were twice as long than for the privately insured. We also find smaller access differences when reimbursement rate differences are smaller. Our findings show that structural differences in reimbursement rates lead to structural differences in health care access. |
| JEL: | I11 I14 I18 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28809&r= |
| By: | Ignaszak, Marek; Jung, Philip; Kuester, Keith |
| Abstract: | Consider a union of atomistic member states, each faced with idiosyncratic business-cycle shocks. Private cross-border risk-sharing is limited, giving a role to a federal unemployment-based transfer scheme. Member states control local labor-market policies, giving rise to a trade-off between moral hazard and insurance. Calibrating the economy to a stylized European Monetary Union, we find notable welfare gains if the federal scheme's payouts take the member states' past unemployment level as a reference point. Member states' control over policies other than unemployment benefits can limit generosity during the transition phase. |
| Keywords: | Fiscal Federalism; labor-market policy; Search and Matching; Unemployment reinsurance |
| JEL: | E24 E32 E62 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15465&r= |
| By: | Mercan, Yusuf; Schoefer, Benjamin; Sedlacek, Petr |
| Abstract: | In recessions, unemployment increases despite the-perhaps counterintuitive-fact that the number of unemployed workers finding jobs expands. On net, unemployment rises only because even more workers lose their jobs. We propose a theory ofunemployment fluctuations resting on this countercyclicality of gross flows from unemployment into employment. In recessions, the abundance of new hires "congests" the jobs the unemployed fill, diminishes their marginal product and discourages further job creation. Countercyclical congestion alone explains about 30â??40 percent of U.S. unemployment fluctuations. Besides generating realistic labor market volatility, it also provides a unified explanation for the cyclical labor wedge, the excess earningslosses from job displacement and from graduating during recessions, and the insensitivity of unemployment to labor market policies, such as unemployment insurance. |
| JEL: | E24 J63 J64 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15500&r= |
| By: | Handel, Benjamin R.; Kolstad, Jonathan; Minten, Thomas; Spinnewijn, Johannes |
| Abstract: | Market provision of impure public goods such as insurance, retirement savings and education is common and growing as policy makers seek to offer more choice and gain efficiencies. This approach induces an important trade-off between improved surplus from matching individuals to products and misallocation due to well documented choice errors in these markets. We study this trade-off in the health insurance market in the Netherlands, with a specific focus on misallocation and inequality. We characterize choice quality as a function of predicted health risk and leverage rich administrative data to study how it depends on individual human capital, socioeconomic status and social and information networks. We find that choice quality is low on average, with many people foregoing options that deliver substantive value. We also find a strong choice quality gradient with respect to key socioeconomic variables. Individuals with higher education levels and more analytic degrees or professions make markedly better decisions. Social influence on choices further increases inequality in decision making. Using panel variation in exposure to peers we find strong within firm, location and family impacts on choice quality. Finally, we use our estimates to model the consumer surplus effects of different counterfactual scenarios. While smart default policies could improve welfare substantially, including the choice of a high-deductible option delivers little welfare gain, especially for low-income individuals who make lower quality choices and are in worse health. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15302&r= |
| By: | Hansen, Kerstin F. (University of Basel); Stutzer, Alois (University of Basel) |
| Abstract: | We analyze how the exposure to adverse macroeconomic conditions during the "impressionable years" (i.e., between the age of 18 and 25), in interaction with welfare state institutions, forms political attitudes in adulthood. Based on a large panel dataset of European countries, we find that individuals who experienced high unemployment under a regime of low unemployment benefits are more in favor of redistribution later in life and state an orientation more oriented towards the left. However, negative economic shocks in an environment with a very generous unemployment insurance are related to less support of redistribution and a more rightist political attitude later on. The development of the welfare state thus seems crucial for how economic shocks affect the evolution of preferences and norms in society and thus finally feedback on institutional change. |
| Keywords: | macroeconomic experiences, impressionable years, support for redistribution, unemployment, unemployment insurance |
| JEL: | E60 J65 P16 P48 Z13 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14327&r= |
| By: | Biewen, Martin (University of Tuebingen); Sturm, Miriam (University of Tübingen) |
| Abstract: | After an economically tough start into the new millennium, Germany experienced an unprecedented employment boom after 2005 only stopped by the COVID-19 pandemic. Persistently high levels of inequality despite a booming labour market and drastically falling unemployment rates constituted a puzzle, suggesting either that the German job miracle mainly benefitted individuals in the mid- or high-income range or that other developments offset the effects of the drastically improved labour market conditions. The present paper solves this puzzle by breaking down the observed changes in the distribution of disposable incomes between 2005/06 and 2015/16 into the contributions of eight different factors, one of them being the employment boom. Our results suggest that, while the latter did have an equalising impact, it was partially offset by the disequalising impact of other factors and substantially dampened by the tax and transfer system. Our results point to a strong role of the German tax and transfer system as a distributional stabilizer implying that, if the COVID-19 shock were to persistently reverse all the employment gains that occurred during the boom, this would only have a moderately disequalising effect on the distribution of net incomes. |
| Keywords: | income distribution, employment, social insurance, labour market reform |
| JEL: | C14 D31 I30 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14357&r= |
| By: | Galecka-Burdziak, Ewa (Warsaw School of Economics); Góra, Marek (Warsaw School of Economics); Jessen, Jonas (DIW Berlin); Jessen, Robin (RWI); Kluve, Jochen (KfW Development Bank) |
| Abstract: | This paper quantifies labour market effects of changes in the potential benefit duration (PBD). The empirical approach uses a particular unemployment insurance set-up from Poland that generates two sources of identifying variation: individual workers' PBD depends directly on the county unemployment rate relative to the national average—12 months of PBD above a cut-off of 125 per cent and 6 months below. In addition, this cut-off shifted from 125 to 150 per cent in a 2009 reform. We use i) the natural experiment generated by this reform, and ii) the sharp discontinuity generated by the cut-offs to estimate effects of shortening PBD on exit from benefit receipt, exit from unemployment, and entry into employment. The analysis is based on administrative data covering unemployment spells for prime age workers during the years 2006-2018. A one-month shorter PBD decreases average benefit duration by 0.5 months and average unemployment duration by 0.4 months. The PBD reduction by six months increased the job finding rate within the first 9 months by 6 percentage points. Using the stock of unemployed per county, we find evidence for positive market-level employment effects. |
| Keywords: | unemployment benefits, extended benefits, spell duration |
| JEL: | H55 J20 J65 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14340&r= |
| By: | Borusyak, Kirill; Hull, Peter |
| Abstract: | We develop new tools for causal inference in settings where exogenous shocks affect the treatment status of multiple observations jointly, to different extents. In these settings researchers may construct treatments or instruments that combine the shocks with predetermined measures of shock exposure. Examples include measures of spillovers in social and transportation networks, simulated eligibility instruments, and shift-share instruments. We show that leveraging the exogeneity of shocks for identification generally requires a simple but non-standard recentering, derived from the specification of counterfactual shocks that might as well have been realized. We further show how specification of counterfactual shocks can be used for finite-sample inference and specification tests, and we characterize the recentered instruments that are asymptotically efficient. We use this framework to estimate the employment effects of Chinese market access growth due to high-speed rail construction and the insurance coverage effects of expanded Medicaid eligibility. |
| Keywords: | Identification strategies; instrumental variables; market access; Natural Experiments; Network spillovers; Randomization inference; Shift-share IV; Simulated instruments; Treatment effects |
| JEL: | C21 C26 F14 I13 R40 |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15319&r= |
| By: | Igor Custodio João (Vrije Universiteit Amsterdam); Andre Lucas (Vrije Universiteit Amsterdam); Julia Schaumburg (Vrije Universiteit Amsterdam) |
| Abstract: | We introduce a new method for dynamic clustering of panel data with dynamics for cluster location and shape, cluster composition, and for the number of clusters. Whereas current techniques typically result in (economically) too many switches, our method results in economically more meaningful dynamic clustering patterns. It does so by extending standard cross-sectional clustering techniques using shrinkage towards previous cluster means. In this way, the different cross-sections in the panel are tied together, substantially reducing short-lived switches of units between clusters (flickering) and the birth and death of incidental, economically less meaningful clusters. In a Monte Carlo simulation, we study how to set the penalty parameter in a data-driven way. A systemic risk surveillance example for business model classification in the global insurance industry illustrates how the new method works empirically. |
| Keywords: | dynamic clustering, shrinkage, cluster membership persistence, Silhouette index, insurance |
| JEL: | G22 C33 C38 |
| Date: | 2021–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210040&r= |
| By: | Levy, Antoine; Ricci, Luca Antonio; Werner, Alejandro |
| Abstract: | This paper assesses the dynamic impact of global macroeconomic conditions, commodity price movements, shifts in portfolio preferences, and domestic shocks on fiscal outcomes-notably the budget deficit, its main components, and debt-across a wide range of countries. Heterogeneity is investigated across the level of development and other structural characteristics. Dynamics are explored via panel local projections, while robustness is assessed via dynamic panel and system GMM regressions. World growth, financial risk appetite, political events, and commodity export prices are key determinants of fiscal outcomes in EM, while domestic growth, commodity import prices, and banking crises appear to matter more in AE. Our estimates help quantify the amount of fiscal risk generated by various factors, and thus provide inputs for the design of potential insurance mechanisms or state-contingent debt instruments that could assist in smoothing fiscal fluctuations. |
| Keywords: | debt; deficit; Fiscal; Fluctuations; Insurance; Sovereign debt |
| JEL: | E62 F41 H6 H87 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:15450&r= |
| By: | Anna Zaytseva (Aix-Marseille Univ, CNRS, AMSE, IRD, Marseille, France.); Pierre Verger (Observatoire Régional de la Santé Provence-Alpes-Côte d'Azur & Aix-Marseille University, IRD, AP-HM, SSA, VITROME, IHU-Méditerranée Infection); Bruno Ventelou (Aix-Marseille Univ, CNRS, AMSE, IRD, Marseille, France.) |
| Abstract: | Background:Given the importance of continuous follow-up of chronic patients, we evaluated performance of French private practice general practitioners (GPs) practicing in multi-professional group practices (MGP), compared to their peers practicing outside MGP, regarding chronic care management during rst Covid-19 lockdown in spring 2020. Methods:The cross-sectional web questionnaire of 1,191 GPs took place in April 2020. We exploit self-reported data on: 1) frequency of consultations for chronic patients during lockdown compared to their typical week before the pandemic, along with 2) GPs proactive behaviour when contacting their chronic patients. We use probit and seemingly unrelated probit models (adjusted for endogeneity of choice of engagement in MGP) to test whether GPs in MGP had signicantly dierent responses to the Covid-19 crisis. Results:We nd that GPs in MGP were less likely to experience a drop in consultations related to complications of chronic diseases. They were also more proactive to contact their chronic patients. Conclusions:Quick policy response is needed to alleviate diculties encountered by GP practicing outside MGPs. Results advocate for further development of integrated care in the long run. |
| Keywords: | general practitioners, France, provider-sponsored organizations, long-term care |
| JEL: | I14 I18 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2132&r= |