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Full-Text Articles in Social and Behavioral Sciences

Building Better Retirement Systems In The Wake Of The Global Pandemic, Olivia S. Mitchell Jun 2020

Building Better Retirement Systems In The Wake Of The Global Pandemic, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

In the wake of the global pandemic known as COVID-19, retirees, along with those hoping to retire someday, have been shocked into a new awareness of the need for better risk management tools to handle longevity and aging. This paper offers an assessment of the status quo prior to the spread of the coronavirus, evaluates how retirement systems are faring in the wake of the shock. Next we examine insurance and financial market products that may render retirement systems more resilient for the world’s aging population. Finally, potential roles for policymakers are evaluated.


Ethics, Insurance Pricing, Genetics, And Big Data, Robert Klitzman Dec 2018

Ethics, Insurance Pricing, Genetics, And Big Data, Robert Klitzman

Wharton Pension Research Council Working Papers

Insurers are rapidly gaining access to consumers’ genetic information. In the US, federal law bars using genetic information in health insurance, but not in life, disability, or long-term care insurance. Accordingly, insurers may fear adverse selection: individuals could undergo testing, learn they have risky genes, and purchase insurance without revealing test results. While other countries have established moratoria on insurers’ use of genetic information, there is no consensus in the U.S. regarding how to avoid ‘unfair discrimination.’ The chapter discusses alternative solutions, including government bans of insurers’ use of genetic information, or limiting insurer information to only high-risk genes.


The Emergence Of The Robo-Advisor, Jill E. Fisch, Marion Labouré, John A. Turner Dec 2018

The Emergence Of The Robo-Advisor, Jill E. Fisch, Marion Labouré, John A. Turner

Wharton Pension Research Council Working Papers

This volume examines how technology is transforming financial applications, and how FinTech promises a similar revolution in the retirement planning processes. Robo-advisors and mobile savings apps are a few harbingers of innovations to come. Nevertheless, these changes will bring with them new ethical and regulatory considerations, design challenges related to promoting adoption by an older population less trusting of technology, and concerns over data security and privacy. Our contributors take stock of the disruptive impact of financial technology on retirement planning, saving, investment, and decumulation; and it also highlights issues that regulators, plan sponsors, academics, and policymakers must consider as ...


Fintech Disruption: Opportunities To Encourage Financial Responsibility, Julianne Callaway Dec 2018

Fintech Disruption: Opportunities To Encourage Financial Responsibility, Julianne Callaway

Wharton Pension Research Council Working Papers

Technological advances have enabled enhancements in the financial services industry such as improved digital sales opportunities, enhanced communication with consumers, expanded accessibility of services, and improved tools for financial planning. These advances are democratizing services once available only to wealthy, extending older peoples’ ability to live independently, and improving their quality of life. This chapter presents a series of case studies explaining how the life insurance industry can use technology and new data to streamline the life insurance underwriting process and improve trust and transparency between insurers and customers. It also discusses how new content can enable on-demand education and ...


Essays In Health Economics, Zahra Mohammadi Jan 2018

Essays In Health Economics, Zahra Mohammadi

Publicly Accessible Penn Dissertations

Opioid abuse is currently the most significant public health problem in the US. Many US

states have implemented prescription drug monitoring programs (PDMPs) in response. In

the rst paper, I use a new micro-level medical claims database to exploit state-level and

time-series variations in PDMP implementation and shed light on the impacts of these

programs. My results show that PDMPs have led to an overall 14% reduction in the odds

ratio of abuse/addiction. Also, there is evidence of substantial heterogeneity in impacts,

with larger impacts for females and minorities. Another nding is that at least 23% of

opioid abuse ...


Primary Care Appointment Availability And The Aca Insurance Expansions, Molly Candon, Daniel Polsky, Brendan Saloner, Douglas Wissoker, Katherine Hempstead, Genevieve M. Kenney, Karin Rhodes Mar 2017

Primary Care Appointment Availability And The Aca Insurance Expansions, Molly Candon, Daniel Polsky, Brendan Saloner, Douglas Wissoker, Katherine Hempstead, Genevieve M. Kenney, Karin Rhodes

Issue Briefs

No abstract provided.


How Has The Affordable Care Act Affected Work And Wages?, Jean Abraham Phd, Anne Beeson Royalty Phd Jan 2017

How Has The Affordable Care Act Affected Work And Wages?, Jean Abraham Phd, Anne Beeson Royalty Phd

Issue Briefs

In a review of the evidence, the authors find that the ACA had minimal effect on employment, hours of work, and compensation. This brief provides critical perspective on the effects of reforms on labor markets for federal and state policymakers as they consider changing or repealing the law.


The Opaqueness Of Structured Bonds: Evidence From The U.S. Insurance Industry, Sojung Carol Park, Jean Lemaire, Xiaoying Xie Oct 2016

The Opaqueness Of Structured Bonds: Evidence From The U.S. Insurance Industry, Sojung Carol Park, Jean Lemaire, Xiaoying Xie

Business Economics and Public Policy Papers

It has been argued that the opaqueness of structured bonds, such as mortgage-backed securities, asset-backed securities and collateral debt obligations, was one of the major causes of the recent financial crisis that started in late 2007. We analyse the evolving nature of information asymmetry inherent in various types of structured bonds by examining the U.S. insurers’ assets. We show that, prior to 2004, structured bonds were not associated with greater information asymmetry; however, holding more multi-class structured bonds, especially privately placed bonds, increased the information asymmetry when evaluating insurers’ assets post-2004. The effect of information asymmetry was more significant ...


Pharmacy Benefit Management: Are Reporting Requirements Pro- Or Anticompetitive?, Patricia M. Danzon Jun 2015

Pharmacy Benefit Management: Are Reporting Requirements Pro- Or Anticompetitive?, Patricia M. Danzon

Health Care Management Papers

The market-based US health care system relies on pharmacy benefit managers (PBMs) to control pharmaceutical costs, in contrast to most other countries that regulate drug prices and access. Optimal strucuturing and regulation of PBM contracts poses significant agency challenges for private and public payers. However, recent reporting requirements for PBMs may be counterproductive and reflect the interests of competitors rather than customers.


Essays On Private Medicare Insurance Markets, You Suk Kim Jan 2014

Essays On Private Medicare Insurance Markets, You Suk Kim

Publicly Accessible Penn Dissertations

This dissertation consists of two essays in economics of industrial organization on private Medicare insurance markets. In the first chapter, together with Naoki Aizawa, we study the incentives for private health insurers to use advertising to attract healthy individuals in the market for private Medicare plans called Medicare Advantage (MA). Using data on the advertising expenditures of MA plans, individual-level and county-level MA enrollment, we document a large difference in an insurer's potential profits from healthy vs. unhealthy individuals. We then develop and estimate an equilibrium model of the MA market, which incorporates strategic advertising by insurers. Parameter estimates ...


The Effect Of Specialty Tier Placement On Enrollment And Utilization In Medicare Part D, Erin Audrey Taylor Jan 2013

The Effect Of Specialty Tier Placement On Enrollment And Utilization In Medicare Part D, Erin Audrey Taylor

Publicly Accessible Penn Dissertations

Health insurance design has distinct and well-documented effects on choice of insurance plan and health care utilization and expenditures. The question of how to design benefits for newer technologies such as specialty drugs presents new challenges in balancing adverse selection and moral hazard concerns with beneficiary coverage. The Medicare Prescription Drug Benefit Program adds complexity via additional governmental regulation of the market and coverage design for specialty drugs. This dissertation presents a conceptual model of the supply-side tier placement decision on the part of Part D plans, and uses Part D formulary and claims data to estimate the demand-side response ...


The Impact Of Health Care Reform On Hospital And Preventive Care: Evidence From Massachusetts, Jonathan T. Kolstad, Amanda E. Kowalski Dec 2012

The Impact Of Health Care Reform On Hospital And Preventive Care: Evidence From Massachusetts, Jonathan T. Kolstad, Amanda E. Kowalski

Health Care Management Papers

In April 2006, Massachusetts passed legislation aimed at achieving near-universal health insurance coverage. The key features of this legislation were a model for national health reform, passed in March 2010. The reform gives us a novel opportunity to examine the impact of expansion to near-universal coverage state-wide. Among hospital discharges in Massachusetts, we find that the reform decreased uninsurance by 36% relative to its initial level and to other states. Reform affected utilization by decreasing length of stay, and the number of inpatient admissions originating from the emergency room. When we control for patient severity, we find evidence that preventable ...


Information Effect Of Entry Into Credit Ratings Market: The Case Of Insurers' Ratings, Neil A. Doherty, Anastasia V. Kartasheva, Richard D. Phillips Nov 2012

Information Effect Of Entry Into Credit Ratings Market: The Case Of Insurers' Ratings, Neil A. Doherty, Anastasia V. Kartasheva, Richard D. Phillips

Business Economics and Public Policy Papers

The paper analyzes the effect of competition between credit rating agencies (CRAs) on the information content of ratings. We show that a monopolistic CRA pools sellers into multiple rating classes and has partial market coverage. This provides an opportunity for market entry. The entrant designs a rating scale distinct from that of the incumbent. It targets higher-than-average companies in each rating grade of the incumbent's rating scale and employs more stringent rating standards. We use Standard and Poor's (S&P) entry into the market for insurance ratings previously covered by a monopolist, A.M. Best, to empirically test ...


African Financial Systems: A Review, Franklin Allen, Isaac Otchere, Lemma W. Senbet Apr 2011

African Financial Systems: A Review, Franklin Allen, Isaac Otchere, Lemma W. Senbet

Finance Papers

We start by providing an overview of financial systems in the African continent. We then consider the regions of Arab North Africa, West Africa, East and Central Africa, and Southern Africa in more detail. The paper covers, among other things, central banks, deposit-taking banks, non-bank institutions, such as the stock markets, fixed income markets, insurance markets, and microfinance institutions.


Insurance And The Demand For Medical Care, Mark V. Pauly Phd Apr 2011

Insurance And The Demand For Medical Care, Mark V. Pauly Phd

Health Care Management Papers

Insurance coverage affects the use and cost of medical care, and so potentially can play a role in assuring that spending comes closer to the optimum. This article describes the implications of third party financing, whether public or private. The key issue is that—in the absence of direct user payment for services—there is an incentive for inefficient moral hazard, or excess use of services. This article uses the voluntary insurance purchasing model to frame the discussion of demand effects because that is the model used extensively in the literature. It later raises the alternative social goals model and ...


Turning Wealth Into Lifetime Income: The Challenge Ahead, Olivia Mitchell, John Piggott Jan 2011

Turning Wealth Into Lifetime Income: The Challenge Ahead, Olivia Mitchell, John Piggott

Business Economics and Public Policy Papers

Longevity risk management was a family obligation in the old days; in the 20th century, as development, migration, and the scattering of families became more common, government and employers took over the role of providing longevity insurance. In the 21st century, demographic shift and government overspending has put all of these sources under stress. This chapter asks whether the future will be an era of more general and formalized private longevity insurance provision through annuities, and we explore answers across several different countries. Some nations have adopted mandatory annuitization; others have mandatory accumulation plans without requiring annuitization; and still others ...


Insurance And Demand For Medical Care, Mark Pauly Phd Jan 2011

Insurance And Demand For Medical Care, Mark Pauly Phd

Business Economics and Public Policy Papers

No abstract provided.


Longevity Risk Management In Singapore’S National Pension System, Joelle Hy Fong, Benedict Sk Koh, Olivia S. Mitchell Jul 2010

Longevity Risk Management In Singapore’S National Pension System, Joelle Hy Fong, Benedict Sk Koh, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

Although annuities are a theoretically appealing way to manage longevity risk, in the real world relatively few consumers purchase them at retirement. To counteract the possibility of retirees outliving their assets, Singapore’s Central Provident Fund, a national defined contribution pension scheme, has recently mandated annuitization of workers’ retirement assets. More significantly, the government has entered the insurance market as a public-sector provider for such annuities. This paper evaluates the money’s worth of life annuities and discusses the impact of the government mandate and its role as an annuity provider on the insurance market.


Essays In Favor-Trading, Simo J. Kalla May 2010

Essays In Favor-Trading, Simo J. Kalla

Publicly Accessible Penn Dissertations

We investigate two previously little studied aspects of favor-trading. First, we study whether and how individuals who stand to gain from favor-trading can best form cooperative relationships in an environment with private information about each agent’s ability and willingness to do favors. For agents with a low discount factor (low types) cooperation is not incentive compatible, for agents with a high discount factor (high types) it is. Both types receive privately observed opportunities to do favors with positive probability each period. We show high types are always able to separate from low types. Separation is implementable as soon as ...


Promoting Food Security In A Volatile Climate: Agricultural Insurance For Senegalese Farmers, Laura Boudreau Apr 2010

Promoting Food Security In A Volatile Climate: Agricultural Insurance For Senegalese Farmers, Laura Boudreau

Wharton Research Scholars

We cannot stop natural calamities, but we can and must better equip individuals and communities to withstand them. Those most vulnerable to nature’s wrath are usually the poorest, which means that when we reduce poverty, we also reduce vulnerability.

- Kofi Annan, Former UN Secretary-General, October 12, 2005

Kofi Annan’s 2005 International Day for Disaster Reduction message followed a year of natural catastrophes including, among others, the 2004 Indian Ocean tsunami that claimed over 280,000 lives, drought and locust plagues across Africa, devastating hurricanes and cyclones in the United States and Caribbean (including Hurricane Katrina), and heavy flooding ...


Implications Of The Financial Crisis For Long Run Retirement Security, Olivia S. Mitchell Jan 2010

Implications Of The Financial Crisis For Long Run Retirement Security, Olivia S. Mitchell

Wharton Pension Research Council Working Papers

Managing retirement risk has become extraordinarily difficult in this era of financial turmoil, global interlinkages, and global population aging. It is particularly fraught since consumers must now engage in long-term contracts with themselves, employers, financial institutions, and governments, regarding the future of retirement financing. Moreover, these agreements will need to remain in force extraordinarily long, for fifty or even one hundred years into the future. This note reviews what institutions and instruments that have a successful track record in retirement risk management over such a long time horizon.


Executive Incentives And Corporate Decisions: The Risk Management Channel, Jeremy O. Skog Dec 2009

Executive Incentives And Corporate Decisions: The Risk Management Channel, Jeremy O. Skog

Publicly Accessible Penn Dissertations

This paper provides evidence that insurance executives respond to their compensation incentives by adjusting observable risk-management policy variables – the reinsurance purchase decision, type of business conducted, and firm leverage. Executive incentives are modeled by the executive sensitivity of wealth to stock price (Delta) and stock volatility (Vega). Firms respond to increased executive incentives to bear risk by purchasing less reinsurance, but also conducting less business in long-tailed lines – a change which rewards the executive through increased market volatility. The cost of altering executive incentives to effect firm policy is much less than a similar change in firm structural variables.


What Makes A Better Annuity?, Jason S. Scott, John G. Watson, Wei-Yin Hu May 2009

What Makes A Better Annuity?, Jason S. Scott, John G. Watson, Wei-Yin Hu

Wharton Pension Research Council Working Papers

The wide gulf between actual and predicted annuity demand has been well documented. However, a comparable gap exists between the current and ideal annuity market. In a world with costly and limited annuity products, we investigate what types of new annuity products could improve annuity market participation and increase individual welfare. We find that participation gains are most likely for new annuity products that focus on late-life payouts which offer a large price discount relative to their financial market analogues. For example, the marginal utility from the first dollar allocated to a late-life annuity can be several times that of ...


Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther Apr 2008

Self-Protection And Insurance With Interdependencies, Alexander Muermann, Howard Kunreuther

Operations, Information and Decisions Papers

We study optimal investment in self-protection of insured individuals when they face interdependencies in the form of potential contamination from others. If individuals cannot coordinate their actions, then the positive externality of investing in self-protection implies that, in equilibrium, individuals underinvest in self-protection. Limiting insurance coverage through deductibles or selling “at-fault” insurance can partially internalize this externality and thereby improve individual and social welfare.


Money In Motion: Dynamic Portfolio Choice In Retirement, Wolfram J. Horneff, Raimond H. Maurer, Olivia S. Mitchell, Michael Z. Stamos Feb 2007

Money In Motion: Dynamic Portfolio Choice In Retirement, Wolfram J. Horneff, Raimond H. Maurer, Olivia S. Mitchell, Michael Z. Stamos

Wharton Pension Research Council Working Papers

Retirees confront the difficult problem of how to manage their money in retirement so as to not outlive their funds while continuing to invest in capital markets. We posit a dynamic utility maximizer who makes both asset location and allocation decisions when managing her retirement financial wealth and annuities, and we prove that she can benefit from both the equity premium and longevity insurance in her retirement portfolio. Even without bequests, she will not fully annuitize; rather, her optimal stock allocation amounts initially to more than half of her financial wealth and declines with age. Welfare gains from this strategy ...


Efficient Annuitization: Optimal Strategies For Hedging Mortality Risk, Jason S. Scott, John G. Watson, Wei-Yin Hu Jan 2007

Efficient Annuitization: Optimal Strategies For Hedging Mortality Risk, Jason S. Scott, John G. Watson, Wei-Yin Hu

Wharton Pension Research Council Working Papers

Two common explanations for the dearth of voluntary annuitization are bequest motives and liquidity demand, both of which create implicit costs for each annuitized dollar. Whenever costs prevent full annuitization, we demonstrate that efficient annuity allocations concentrate annuity-funded consumption late in life. This implies traditional immediate payout annuities are inefficient relative to recently introduced “delayed payout annuities” which have survival-contingent payments beginning years after purchase. For typical examples, a six percent delayed payout allocation has utility comparable to a thirty-nine percent immediate annuity allocation. Since retirees appear averse to large annuity purchases, delayed payout annuities could significantly improve retiree welfare.


Optimizing The Retirement Portfolio: Asset Allocation, Annuitization, And Risk Aversion, Wolfram J. Horneff, Raimond Maurer, Olivia S. Mitchell, Ivica Dus Jul 2006

Optimizing The Retirement Portfolio: Asset Allocation, Annuitization, And Risk Aversion, Wolfram J. Horneff, Raimond Maurer, Olivia S. Mitchell, Ivica Dus

Wharton Pension Research Council Working Papers

Retirees must draw down their accumulated assets in an orderly fashion so as not to exhaust their funds too soon. We derive the optimal retirement portfolio from a menu that includes payout annuities as well as an investment allocation and a withdrawal strategy, assuming risk aversion, stochastic capital markets, and uncertain lifetimes. The resulting portfolio allocation, when fixed as of retirement, is then compared to phased withdrawal strategies such a “self-annuitization” plan or the 401(k) “default” pattern encouraged under US tax law. Surprisingly, the fixed percentage approach proves appealing for retirees across a wide range of risk preferences, supporting ...


Post-Employment Benefits, Economics And Accounting: Moral Hazard And Frail Benefit Designs, Jeremy Gold Jan 2004

Post-Employment Benefits, Economics And Accounting: Moral Hazard And Frail Benefit Designs, Jeremy Gold

Wharton Pension Research Council Working Papers

This paper uses economic principles to analyze alternative definitions for end-of-period liabilities under post-employment benefit plans; the candidates, using U.S. nomenclature, are the vested benefit obligation (VBO), the accumulated benefit obligation (ABO) and the projected benefit obligation (PBO). In competitive employment markets with rational contracting we are unable to justify projected costing (PBO-based) for typical pay-related defined benefit plans. Projected costing misrepresents the economic obligations incurred by shareholders and invites moral hazard. Employee exposure to moral hazard may be minimized by exit costing (VBObased) which recognizes only those benefits to which an exiting employee is entitled under the explicit ...