NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by George Zanjani

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Working Papers

April 2013Economic Analysis of Risk and Uncertainty induced by Health Shocks: A Review and Extension
with Tomas J. Philipson: w19005
We review and extend the economic analysis of risk and uncertainty as it relates to behavior mitigating health shocks. We summarize some central aspects of the vast positive and normative literature on the role of various forms of insurance that attempt to smooth consumption, which can be uneven due to medical spending induced by health shocks. Much of this literature has been concerned with the barriers that prevent full insurance and the role of the government eliminating their adverse consequences. We argue that this large literature is limited in that it is focused largely on consumption smoothing rather than smoothing of health itself. However, a problem with insuring health itself is that human capital cannot be traded; a person diagnosed with an incurable cancer cannot be made w...
December 2006Catastrophe Bonds, Reinsurance, and the Optimal Collateralization of Risk-Transfer
with Darius Lakdawalla: w12742
Catastrophe bonds feature full collateralization of the underlying risk transfer, and thus abandon the insurance principle of economizing on collateral through diversification. We examine the theoretical foundations beneath this paradox, finding that fully collateralized instruments have important uses in a risk transfer market when insurers cannot contract completely over the division of assets in the event of insolvency, and, more generally, cannot write contracts with a full menu of state-contingent payments. In this environment, insureds have different levels of exposure to an insurer's default. When contracting constraints limit the insurer's ability to smooth out such differences, catastrophe bonds can be used to deliver coverage to those most exposed to default. We demonstrate how...
September 2002Insurance, Self-Protection, and the Economics of Terrorism
with Darius Lakdawalla: w9215
This paper investigates the rationale for government intervention in the market for terrorism insurance, focusing on the externalities associated with self-protection. Self-protection by one target encourages terrorists to substitute towards less fortified targets. Investments in self- protection thus have negative external effects in the presence of rational terrorists. Government subsidies for terror insurance can discourage self-protection and limit the inefficiencies associated with these and other types of negative externalities. They may also serve as a complement to a policy of publicly provided protection.

Published: Lakdawalla, Darius and George Zanjani. "Insurance, Self-Protection, And The Economics Of Terrorism," Journal of Public Economics, 2005, v89(9-10,Sep), 1891-1905. citation courtesy of

October 1997Consumption vs. Production of Insurance
with Tomas Philipson: w6225
Many forms of insurance are produced by groups themselves rather than purchased in the market. For example, coverage for workers compensation provided by employers is often produced by the employer, in the sense that the employer bears some or all of the financial risk associated with the insurance. This paper generalizes the theory of insurance to analyze what factors determine whether groups produce insurance internally by self-insuring or consume it by purchasing coverage in the market. The" theory makes cross-sectional predictions on which firms will choose to produce insurance, as well as how prices and loss experience will vary with the production decision; the theory also predicts which lines of insurance are likely to be associated with internal production and those in which cove...

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