Summary

Benefit Duration and Job Search Effort: Evidence from a Natural Experiment
Author(s):
Andreas Lichter, HHU Duesseldorf and IZA
Summary:

Findings of prolonged nonemployment spells due to more generous unemployment insurance (UI) schemes are commonly interpreted as an indication of reduced job search effort and UI-induced moral hazard. Lichter exploits quasi-experimental variation in the potential benefit duration for one particular age group of workers in Germany paired with individual-level data on job search behavior to directly investigate the assumed relationship. The results of this study provide substantial support for strategic job search behavior in response to the generosity of the unemployment insurance scheme: extension of the potential benefit duration cause job search effort to significantly decrease, lowering the number of filed applications and the probability of applying for a job that requires moving. The results further suggests that the observed responses in job search effort are indeed due to moral hazard behavior.

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Disability, Earnings, Income and Consumption
Author(s):
Bruce D. Meyer, University of Chicago and NBER
Wallace K.C. Mok, Chinese University of Hong Kong
Summary:

Meyer and Mok study the well-being of the disabled and the economic benefits of disability insurance. Using longitudinal data for 1968-2009 for male household heads, the researchers determine the prevalence of working-age disability, its association with a wide range of economic outcomes including, earnings, income, consumption, wealth and time-use. The authors disaggregate the disabled based on the persistence and severity of work-limiting conditions and find that disability is common and associated with poor economic outcomes. The outcomes differ sharply by disability group. The researchers then provide the range of behavioral elasticities and preference parameters consistent with current disability compensation being optimal in the Baily-Chetty framework.

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In addition to the conference paper, the research was distributed as NBER Working Paper w18869, which may be a more recent version.

Adverse Selection in Micro-Health Insurance Markets: Evidence from a Randomized Control Trial in Pakistan
Author(s):
Torben Fischer, University of Mannheim
Markus Frölich, University of Mannheim
Andreas Landmann, University of Mannheim
Summary:

Fischer, Frolich, and Landmann provide robust evidence on adverse selection in low-income health insurance markets from a randomized control trial in rural Pakistan. Their experimental setup allows them to separate adverse selection from moral hazard, to estimate how selection changes at different points of the price curve and to test different measures against adverse selection. The results suggest that there is substantial adverse selection if health insurance coverage can be individually assigned. In particular, adverse selection becomes worse with higher premium prices, creating a trade-off between cost recovery and the quality of the insurance pool. In contrast, adverse selection is mitigated through bundling insurance policies at the household or higher levels. The results for the authors' sample suggest that insurers should abstain from offering individual policies to avoid adverse selection, which should allow them to focus on simple and comprehensive products for the low-income market.

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Optimal Partial Unemployment Insurance: Evidence from Bunching in the U.S.
Author(s):
Thomas Le Barbanchon, Bocconi University
Summary:

In this paper, Le Barbanchon uses kinks in the U.S. partial unemployment insurance schedule to study the response of claimants to the program. Partial unemployment insurance enables claimants to keep part of their unemployment benefits when they work in low-earnings jobs. When U.S. claimants earn over a state-specific threshold, termed the “disregard," their benefits are reduced at a 100% marginal tax rate above that amount. This reduction in current benefits leads to an increase in future benefits, with the result that forward-looking claimants are taxed according to a lower dynamic marginal tax rate. To account for these mechanisms, the researcher develops a dynamic model of claimants, who work in part-time/temporary jobs while searching for permanent jobs. Using administrative data on weekly claims, Le Barbanchon documents substantial bunching of unemployment insurance claimants at the disregard level. He estimates that the earnings elasticity to the net-of-tax-rate (at the intensive margin) lies between 0.1 and 0.2. Using this estimate, simulations show that setting the benefit reduction rate at 80% is Pareto improving, as the current schedule induces claimants to inefficiently reduce their earnings.

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The Pros and Cons of Sick Pay Schemes: Testing for Contagious Presenteeism and Shirking Behavior
Author(s):
Stefan Pichler, ETH Zurich
Nicolas R. Ziebarth, Cornell University
Summary:

This paper proposes a test for the existence and degree of contagious presenteeism and negative externalities in sickness insurance schemes. First, Pichler and Ziebarth theoretically decompose moral hazard into shirking and contagious presenteeism behavior and derive testable conditions. Then, they implement the test exploiting German sick pay reforms and administrative industry-level data on certified sick leave by diagnoses. The labor supply adjustment for contagious diseases is significantly smaller than for noncontagious diseases. Lastly, using Google Flu data and the staggered implementation of U.S. sick leave reforms, the researchers show that flu rates decrease after employees gain access to paid sick leave.

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Can Financial Incentives Reduce the Baby Gap? -Evidence from a Reform in Maternity Leave Benefits
Author(s):
Anna Raute, Queen Mary University of London
Summary:

Raute studies whether earnings dependent parental benefits have a positive impact on fertility, and whether they are successful at narrowing the baby gap between high educated (high earning) and low educated (low earning) women. She exploits a reform in parental leave benefits in Germany: Up until 2007 German parental benefits were means-tested transfers and targeted at lower income families. From 2007 onwards parental leave benefits were increasing in mother's pre-birth earnings with a minimum benefit being granted to all mothers. The reform increased the financial incentives to have a child for higher educated and higher-earning women considerably, by up to 21,000.

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The General Equilibrium Impacts of Unemployment Insurance: Evidence from a Large Online Job Board
Author(s):
Ioana Marinescu, University of Pennsylvania and NBER
Summary:

During the Great Recession, U.S. unemployment benefits were extended by up to 73 weeks. Theory predicts that extensions increase unemployment by discouraging job search, a partial equilibrium effect. Using data from the large job board CareerBuilder.com, Marinescu finds that a 10% increase in benefit duration decreased state‐level job applications by 1%, but had no robust effect on job vacancies. Job seekers thus faced reduced competition for jobs, a general equilibrium effect. Calibration implies that the general equilibrium effect reduces the impact of unemployment insurance on unemployment by 40%: increasing benefit duration by 10% increases unemployment by only 0.6% in equilibrium.

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