are health insurance markets competitive to gauge the competitiveness of the group health insurance industry i investigate whether health insurers charge higher premiums ceteris paribus to more profitable firms such direct price discrimination is feasible only in imperfectly competitive settings using a proprietary national database of health plans offered by a sample of large multisite firms from 1998 2005 i find firms with positive profit shocks subsequently face higher premium growth even for the same health plans moreover within a given firm those sites located in concentrated insurance markets experience the greatest premium increases the findings suggest health care insurers are exercising market power in an increasing number of geographic markets

testing for asymmetric information in insurance markets the first goal of this paper is to provide a simple and general test of the presence of asymmetric information in contractual relationships within a competitive context we also argue that insurance data are particularly well suited to such empirical investigations to illustrate this claim we use data on contracts and accidents to investigate the extent of asymmetric information in the french market for automobile insurance using various parametric and nonparametric methods we find no evidence for the presence of asymmetric information in this market

the effectiveness of bank capital adequacy regulation a theoretical and empirical approach the aim of this paper is to analyse how banking firms set their capital ratios that is the rate of equity capital over assets in order to study this isue two theoretical models are developed both models deal with the existence of an optimal capital ratio the first one for firms not affected by capital adequacy regulation the second one for firms which are the models have been tested by estimating a disequilibrium model using data of spanish savings banks

mandate based health reform and the labor market evidence from the massachusetts reform we model the labor market impact of the key provisions of the national and massachusetts mandate based health reforms individual mandates employer mandates and subsidies we characterize the compensating differential for employer sponsored health insurance eshi and the welfare impact of reform in terms of sufficient statistics we compare welfare under mandate based reform to welfare in a counterfactual world where individuals do not value eshi relying on the massachusetts reform we find that jobs with eshi pay 2812 less annually somewhat less than the cost of eshi to employers accordingly the deadweight loss of mandate based health reform was approximately 8 percent of its potential size

does smallholder land titling facilitate agricultural growth an analysis of the determinants and effects of smallholder land titling in zambia summary zambia s land policies privilege agricultural land alienation by wage earners over local smallholder farmers as a result land title holders are not statistically significantly different from non title holders in terms of agricultural productivity despite greater access to investment capital from wage earnings and higher levels of education the effects of land titling on long and medium term land investments are also limited these results are indicative of widespread speculative alienation of agricultural land by wage earners enabling more productive land users to acquire title requires policy change aimed at lowering the transaction costs and bureaucratic complexity of acquiring land title

the deadweight gain of insurance taxation when risky activities are optional abstract some risky activities are optional for example motoring participation in them is most attractive for good risks creating a tendency for advantageous selection in the associated insurance market taxing insurance consequently yields deadweight gains when type is hidden results are strengthened if optimism is present finally endogenising participation implies that the standard positive correlation test for the presence of policy relevant asymmetric information may fail

multidimensional private information market structure and insurance markets we investigate whether selection based on multidimensional private information in risks and risk preferences can under different market structures result in a negative correlation between insurance coverage and ex post realization of risk we show that under perfect competition selection based on multidimensional private information does not result in the negative correlation property unless there is a sufficiently high loading factor however it is possible to generate the negative correlation property under monopoly when risk and risk preference types are sufficiently negative dependent we also clarify the connections between important concepts such as adverse advantageous selection and positive negative correlation property

the joint production of confidence endogenous regulation and nineteenth century commercial bank clearinghouses during the nineteenth century deposits increased relative to bank notes c ausing increased information asymmetry problems in banking this pape r describes how bank clearinghouses lowered these costs by monitoring bank activities and establishing mechanisms of managerial control i n effect regulating bank behavior such actions enforced the loca l one to one exchange rate between deposits and specie clearinghouse s increased regulation during financial panics creating and enforcin g a risk sharing device loan certificates for addressing panic rela ted information problems this paper concludes that the market s capacity to control bank managers depends on the banking product mix and more generally on information costs copyright 1987 by ohio state university press

cohort mortality risk or adverse selection in annuity markets abstract we show that tests for adverse selection in annuity markets using prices are not identified within the uk annuity market different annuity products create the potential for a rothschild stiglitz separating equilibrium as different risk types could choose different annuities empirical analyses using the money s worth suggest that prices are indeed consistent with this explanation however we show that this pattern of annuity prices would also result from the actions of regulated annuity providers who must reserve against cohort mortality risk annuity products that might attract different consumer risk types also have different risks for the provider

does public insurance crowd out private insurance the cost of expanding public sector health programs depends critically on the extent to which public eligibility will cover just the uninsured or will crowd out existing private insurance coverage we estimate the extent of crowd out arising from the expansions of medicaid to pregnant women and children over the 1987 1992 period we estimate that approximately 50 percent of the increase in medicaid coverage was associated with a reduction in private insurance coverage this occurred largely because employees took up employer based insurance less frequently there is also some evidence that employers contributed less for insurance and that workers dropped coverage of dependents

growth opportunities and risk taking by financial intermediaries we show that growth opportunities which cannot be converted to cash under conditions of financial distress gz are a critical determinant of an intermediary s choice of risk financial institutions in which gz is a low proportion of total assets will be much more likely to engage in go for broke behavior the model leads to a reevaluation of the effectiveness of several traditional remedies for dealing with banks that take excessive risks such as raising insurance premiums intervening before capital is depleted and restricting investment options the model also has implications about a new approach to the examination of financial intermediaries the insuring agencies are painfully aware that when a bank is at or near insolvency it has an incentive to take greater risks stanley silverberg 1984 p 100 director of research at the federal deposit insurance corporation has observed that under such conditions it is generally in the interest of managers and owners to gamble in an effort to recoup if the bank rolls the dice and loses the fdic typically bears the loss of course bank shareholders like shareholders in other limited liability corporations have an incentive to take larger gambles than if their activities were financed entirely by equity what distinguishes go for broke behavior however is that a firm in go for broke mode will be willing to play with dice loaded against it go for broke behavior occurs when a firm chooses an operating strategy that will lower the expected value of its assets a firm in go for broke mode causes a loss to society since it will allocate resources to uses that have a lower expected return than the opportunity cost of funds in this paper we examine the conditions under which a bank has an incentive to adopt go for broke behavior and the challenge faced by regulators in controlling such behavior we show that weakly capitalized banks with negligible opportunities for profitable growth pose the greatest threat and that traditional supervisory remedies are least effective against such banks

selection in insurance markets theory and empirics in pictures government intervention in insurance markets is ubiquitous and the theoretical basis for such intervention based on classic work from the 1970s has been the problem of adverse selection over the last decade empirical work on selection in insurance markets has gained considerable momentum this research finds that adverse selection exists in some insurance markets but not in others and it has uncovered examples of markets that exhibit advantageous selection a phenomenon not considered by the original theory and one that has different consequences for equilibrium insurance allocation and optimal public policy than the classical case of adverse selection advantageous selection arises when the individuals who are willing to pay the most for insurance are those who are the most risk averse and so have the lowest expected cost indeed it is natural to think that in many instances individuals who value insurance more may also take action to lower their expected costs drive more carefully invest in preventive health care and so on researchers have taken steps toward estimating the welfare consequences of detected selection and of potential public policy interventions in this essay we present a graphical framework for analyzing both theoretical and empirical work on selection in insurance markets this graphical approach provides both a useful and intuitive depiction of the basic theory of selection and its implications for welfare and public policy as well as a lens through which one can understand the ideas and limitations of existing empirical work on this topic

caught in a productivity trap a distributional perspective on gender differences in malawian agriculture in targeting poverty gains sub saharan african governments have emphasized the alleviation of gender differences in agricultural productivity the empirical studies on the gender gap however have frequently used data that were limited regarding geographic and topical coverage and or details on intra household dynamics the study provides a nationally representative analysis of the gender gap in malawi and decomposes it for the first time at the mean and at selected points of the agricultural productivity distribution into i a portion driven by gender differences in levels of observable attributes the endowment effect and ii a portion driven by gender differences in returns to the same set of observables the structure effect sequentially the authors unpack the relative contributions of different factors towards the gender gap and suggest future research priorities to inform policy interventions the authors find that while female managed plots are on average 25 percent less productive 82 percent of this differential is explained by differences in endowments mainly due to high value crop cultivation and levels of household adult male labor inputs the factors driving the structure effect include child dependency ratio and effectiveness of household adult male labor and inorganic fertilizer the gender gap increases across the productivity distribution ranging from 22 percent at the 10th percentile to 37 percent at the 90th percentile while it is explained predominantly by the endowment effect in the first half of the distribution the contribution of the structure effect towards the gender gap increases steadily above the median standing at 34 percent at the 90th percentile

economic efficiency and supply response of women as farm managers comparative evidence from western kenya summary this paper assessed the relative economic efficiency and output supply and input demand responses of women farmers in western kenya the results showed that women are as technically and allocatively efficient as men however neither men nor women have absolute allocative efficiency women farmers are equally responsive to price incentives in terms of output supply and input demand while education and extension contact have significant effects on overall maize supply and input demand only extension contact has significant effects among women farmers the paper discusses a number of significant results and concludes with implications for policy

how did health care reform in massachusetts impact insurance premiums it is widely recognized that the 2006 massachusetts health reforms served as a blueprint for national reform under the 2010 affordable care act aca as such there is interest in using the massachusetts experience to understand how insurance premiums might change under the aca in this paper we analyze changes in private insurance premiums in massachusetts between 2002 and 2010 in contrast to earlier estimates from massachusetts cogan hubbard and kessler 2010 we find no statistical evidence of changes in group premiums by contrast we find large reductions in non group premiums in massachusetts relative to the rest of the u s

the pecking order of segmentation and liquidity injection policies in a model of contagious crises we study a two country setting in which leveraged investors generate fire sale externalities leading to financial crises and contagion governments can affect the incidence of financial crisis and the degree of contagion by injecting public liquidity and additionally by segmenting the countries liquidity markets we show that segmentation allows a country to avoid contagion and fend off mild financial crises caused by a small shock to its liquidity demand at the cost of exposing it to more severe financial crises caused by a large shock we derive a pecking order result whereby segmentation is a second best measure that coordinated governments should use only when tax capacity constrains them from injecting liquidity even when segmentation is welfare enhancing it should be applied to public liquidity alone never restricting the free flow of private liquidity across countries uncoordinated governments tend to use segmentation excessively

health reform health insurance and selection estimating selection into health insurance using the massachusetts health reform approximately 49 9 million people in the united states lack health insurance denavas walt proctor and smith 2011 one potential driver of uninsurance is asymmetric information on health risk between insurers and the insured asymmetric information can distort available insurance contracts as in rothschild and stiglitz 1976 or it can raise premiums for the relatively healthy as in akerlof 1970 both distortions result in in efficiently low levels of insurance coverage predicated at least in part on concerns about adverse selection the state of massachusetts passed health reform in april 2006 aimed at achieving near universal health insurance coverage the massachusetts approach is considered a model for national health reform the patient protection and affordable care act ppaca signed in march 2010 a central feature of both reforms is a mandate that individuals obtain health insurance or pay a penalty the massachusetts mandate allows us to examine whether there was adverse selection into health insurance before the reform in contrast existing literature generally examines adverse selection among employer sponsored plans e g cutler and reber 1998 einav finkelstein and cullen 2010 which is less relevant for policy our simple empirical methodology is based on the observation that the direction of selection depends on the difference between the cost of the marginal enrollee and the cost of those who already have insurance if the cost of the marginal enrollee is below the average cost of those who are already insured selection is adverse if the cost of the marginal enrollee is above the average cost of those who are already insured selection is advantageous therefore as demonstrated by einav finkelstein and cullen 2010 the sign of the slope of the average cost curve captures selection we use the massachusetts reform to provide an exogenous shift in coverage that identifies the slope of the average cost curve we find that counties with larger increases in coverage over the reform period face the smallest increase in average hospital costs for the insured population consistent with adverse selection into insurance before reform additional results that incorporate cross state variation and data on health measures provide further evidence for adverse selection

the optimal size of a bank costs and benefits of diversification abstract this paper provides a theory of diversification and financial structure of banks it shows that by diversifying the bank portfolio and financing it with debt the bank can commit to a higher level of monitoring by linking the benefits of diversification to the costs the paper derives an optimal size of the bank which is bounded the costs of diversification lie in the higher overload costs with which the banker is faced by monitoring more projects the benefits of diversification lie in increasing the bank s owner s incentives to monitor the lenders

pricing and welfare in health plan choice premiums in health insurance markets frequently do not reflect individual differences in costs either because consumers have private information or because prices are not risk rated this creates inefficiencies when consumers self select into plans we develop a simple econometric model to study this problem and estimate it using data on small employers we find a welfare loss of 2 11 percent of coverage costs compared to what is feasible with risk rating only about one quarter of this is due to inefficiently chosen uniform contribution levels we also investigate the reclassification risk created by risk rating individual incremental premiums finding only a modest welfare cost

insurance as a lemons market coverage denials and pooling abstract the standard monopoly insurance model with adverse selection implies that there are always gains to trade that only the best unobservable risks can go uninsured and that a profit maximizing menu cannot pool all types we show that insurance provision costs can explain both coverage denials only to those likely to be the worst risks and complete pooling specifically we prove a general comparative statics theorem formalizing coverage denials only to those deemed to be the worst risks and two theorems showing that the insurer offers a single contract complete pooling with either zero or positive coverage we point out some implications of these results for empirical work on insurance our results expand upon a point made by hendren 2013 that the main effect of adverse selection on insurance might not be misallocation in active markets the traditional emphasis after rothschild and stiglitz 1976 but simply in shutting down markets as in akerlof 1970 classic lemons model

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

youth migration and labour constraints in african agrarian households using panel data from ethiopia and malawi we investigate how youth migration affects household labour hired labour demand and income and whether these effects vary by migrant sex and destinatio

optimal bank regulation and fiscal capacity financial regulation is synchronized across countries despite the fact that countries vary widely in their ability to bail out their banking sector in the event of a nancial crisis this paper addresses the question of whether countries with dierent scal capacity should optimally have dierent ex ante minimum bank capital requirements in an environment with endogenously in complete markets and overinvestment because of moral hazard and pecuniary externalities i show that countries with larger scal capacity should have lower ex ante minimum bank capital require ments this result is the opposite of what one may expect given that countries with larger scal capacity often have stronger moral hazard i also show that in addition to a minimum bank capital requirement regulators in countries with strong moral hazard which are countries with a concen trated nancial sector and large scal capacity should impose a limit on the amount of liquidity pledged by nancial institutions in a crisis state this would entail restricting the amount of put options cds contracts sold by nancial institutions among other measures

how does the stock market view bank regulatory capital forbearance policies during the subprime crisis the fdic has shown once again laxity in resolving and closing insolvent institutions ronn and verma 1986 call the tolerance level below which a bank closure is triggered the regulatory policy parameter we derive a model in which we make this parameter stochastic and bank specific to infer the stock market view of the regulatory capital forbearance value for 565 u s listed banks during 1990 to 2012 the countercyclical forbearance fraction in capital most substantial in recessions could represent 17 on average of the market valuation of bank equity and could go as high as 100

is the international convergence of capital adequacy regulation desirable the merit of international convergence of bank capital requirements in the presence of divergent closure policies of diierent central banks is examined the lack of a complementary variation between minimum bank capital requirements and regulatory forbearance leads to a spillover from more forbearing to less forbearing economies and reduces the competitive advantage of banks in less forbearing economies linking the central bank s forbearance to its alignment with domestic bank owners it is shown that in equilibrium a regression toward the worst closure policy may result the central banks of initially less forbearing economies also adopt greater forbearance i analyze the joint design of two bank regulatory mechanisms minimum capital requirements which are an ex ante mechanism to prevent bank failures and closure policy which is an ex post mechanism to manage the cost of bank failures at the heart of the paper is a simple but fundamental point ex post policies affect ex ante incentives and hence the design of an ex ante mechanism must take into account any feedback from the ex post policies the optimal design of capital requirements is thus tied to the extent of forbearance exercised by the central bank s closure policy this warrants a closer scrutiny of the merits of creating a level playing eld in capital requirements across countries as proposed and

advantageous selection in insurance markets this article reverses the standard conclusion that asymmetric information plus competition results in insufficient insurance provision risk tolerant individuals take few precautions and are disinclined to insure but they are drawn into a pooling equilibrium by the low premiums created by the presence of safer more risk averse types taxing insurance drives out the reckless clients allowing a strict pareto gain this result depends on administrative costs in processing claims and issuing policies as does the novel finding of a pure strategy partial pooling subgame perfect nash equilibrium in the insurance market copyright 2001 by the rand corporation

asymmetric information in insurance general testable implications several recent articles on empirical contract theory and insurance have tested for a positive correlation between coverage and ex post risk as predicted by standard models of pure adverse selection or pure moral hazard we show here that the positive correlationproperty can be extended to general setups competitive insurance markets and cases where risk aversion is public we test our results on a french dataset our tests confirm that the estimated correlation is positive they also suggest the presence of market power

how much of the labor in african agriculture is provided by women the contribution of women to labor in african agriculture is regularly quoted in the range of 60 to 80 percent using individual disaggregated plot level labor input data from nationally representative household surveys across six sub saharan african countries this study estimates the average female labor share in crop production at 40 percent it is slightly above 50 percent in malawi tanzania and uganda and substantially lower in nigeria 37 percent ethiopia 29 percent and niger 24 percent there are no systematic differences across crops and activities but female labor shares tend to be higher in households where women own a larger share of the land and when they are more educated controlling for the gender and knowledge profile of the respondents does not meaningfully change the predicted female labor shares the findings question prevailing assertions regarding substantial gains in aggregate crop output as a result of increasing female agricultural productivity

the regulator s trade off bank supervision vs minimum capital abstract we develop a simple model of banking regulation with two policy instruments minimum capital requirements and the supervision of domestic banks the regulator faces a trade off high capital requirements cause a drop in the banks profitability whereas strict supervision reduces the scope of intermediation and is costly for taxpayers we show that a mix of both instruments minimises the costs of preventing the collapse of financial intermediation once we allow for cross border banking the optimal policy is not feasible if domestic supervisory effort is not observable our model predicts a race to the bottom in capital requirement regulation therefore countries are better off by harmonising regulation on an international standard

the profits of power land rights and agricultural investment in ghana we examine the impact of ambiguous and contested land rights on investment and productivity in agriculture in akwapim ghana we show that individuals who hold powerful positions in a local political hierarchy have more secure tenure rights and that as a consequence they invest more in land fertility and have substantially higher output the intensity of investments on different plots cultivated by a given individual corresponds to that individual s security of tenure over those specific plots and in turn to the individual s position in the political hierarchy relevant to those specific plots

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

observing unobservables identifying information asymmetries with a consumer credit field experiment information asymmetries are important in theory but difficult to identify in practice we estimate the presence and importance of hidden information and hidden action problems in a consumer credit market using a new field experiment methodology we randomized 58 000 direct mail offers to former clients of a major south african lender along three dimensions i an initial offer interest rate featured on a direct mail solicitation ii a contract interest rate that was revealed only after a borrower agreed to the initial offer rate and ii a dynamic repayment incentive that was also a surprise and extended preferential pricing on future loans to borrowers who remained in good standing these three randomizations combined with complete knowledge of the lender s information set permit identification of specific types of private information problems our setup distinguishes hidden information effects from selection on the offer rate via unobservable risk and anticipated effort from hidden action effects via moral hazard in effort induced by actual contract terms we find strong evidence of moral hazard and weaker evidence of hidden information problems a rough estimate suggests that perhaps 13 to 21 of default is due to moral hazard asymmetric information thus may help explain the prevalence of credit constraints even in a market that specializes in financing high risk borrowers

inefficiency of male and female labor supply in agricultural households evidence from uganda this article analyzes the efficiency of the intra household allocation of female and male labor inputs in agricultural production in a collective household model spouses optimal on farm labor supply is such that the marginal rate of technical substitution between male and female labor is equated over different crops using the uganda national household survey 2005 06 we test whether this condition holds by estimating production functions and controlling for endogeneity using a method proposed by gandhi navarro and rivers 2009 we find that women are less productive than men that there is more female labor input on low productivity parcels and that men are relatively more productive on female controlled plots compared with male controlled plots total farm output could be higher and pareto improvements could be possible if male labor was reallocated to female controlled plots and or female labor was reallocated to male controlled plots

the effects of closure policies on bank risk taking abstract this paper models bank closure policy for a risk averse bank that enjoys flat rate deposit insurance we find that increasing the level of net worth at which banks are closed can increase or decrease induced risk aversion as well as increase the likelihood that marginally healthy banks would be subject to extreme moral hazard these result suggest that more timely closure policies should be imposed in conjunction with greater monitoring of bank portfolio risk and with restrictions on risk taking for marginally healthy banks in addition we find that changes in closure policy can increase or decrease desired leverage and that this effect depends on the degree of correlation among asset returns

gender and agricultural productivity implications of the farm input subsidy program in malawi alleviating gender differences in agricultural productivity is vital for poverty reduction while numerous studies suggest that gender differences in agricultural productivity are a result of female farmers having limited access to resources few studies investigate the role of agricultural interventions in alleviating the constraints to input use and subsequently the gender gap in productivity this study investigates whether there are gendered gains in agricultural productivity from participating in an input subsidy program and if these gains help reduce the gender gap using nationally representative data that is disaggregated at the plot level this study analyzes the large scale voucher based farm input subsidy program in malawi focusing on the total value of output per hectare relationships are identified using weighted estimators where the weights are constructed from propensity scores and spatial fixed effects to address the unobservable factors that may confound the relationship between program participation and productivity the findings suggest that participation in the program improves agricultural productivity for both male and female farmers but it does not provide disproportionate help to female famers to overcome gender disparities in agricultural productivity this suggests that female farmers face additional constraints to productivity apart from nonlabor input use

investigating the gender gap in agricultural productivity evidence from uganda women comprise 50 percent of the agricultural labor force in sub saharan africa but manage plots that are reportedly on average 20 to 30 percent less productive as a source of income inequality and aggregate productivity loss the country specific magnitude and drivers of this gender gap are of great interest using national data from the uganda national panel survey for 2009 10 and 2010 11 the gap before controlling for endowments was estimated to be 17 5 percent panel data methods were combined with an oaxaca decomposition to investigate the gender differences in resource endowment and return to endowment driving this gap although men have greater access to inputs input use is so low and inverse returns to plot size so strong in uganda that smaller female managed plots have a net endowment advantage of 12 percent revealing a larger unexplained gap of 29 5 percent two fifths of this unexplained gap is attributed to differential returns to the child dependency ratio and one fifth to differential returns to transport access implying that greater child care responsibilities and difficulty accessing input and output markets from areas without transport are the largest drivers of the gap smaller and less robust drivers include differential uptake of cash crops and differential uptake and return to improved seeds and pesticides

health insurance and mortality experimental evidence from taxpayer outreach we evaluate a randomized pilot study in which the irs sent informational letters to 3 9 million taxpayers who paid a tax penalty for lacking health insurance coverage under the affordable care act drawing on administrative data we study the effect of the intervention on taxpayers subsequent health insurance enrollment and mortality we find the intervention led to increased coverage in the two years following treatment and that this additional coverage reduced mortality among middle aged adults over the same time period our results provide the first experimental evidence that health insurance reduces mortality

supervising cross border banks theory evidence and policy this paper analyses the distortions that banks cross border activities such as foreign assets deposits and equity can introduce into regulatory interventions we find that while each individual dimension of cross border activities distorts the incentives of a domestic regulator a balanced amount of cross border activities does not necessarily cause inefficiencies as the various distortions can offset each other empirical analysis using bank level data from the recent crisis provides support to our theoretical findings specifically banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state reflecting the distorted incentives of national regulators we discuss several implications for the supervision of cross border banks in europe thorsten beck radomir todorov and wolf wagner

quantifying the premium externality of the uninsured in some insurance markets the uninsured can generate a negative externality on the insured leading insurance companies to pass on costs as higher premia using a novel panel data set and a staggered policy change that exogenously varied the rate of uninsured drivers at the county level in california we quantitatively investigate the effect of uninsured motorists on automobile insurance premia consistent with predictions of theory we find uninsured drivers lead to higher insurance premia specifically a 1 percentage point increase in the rate of uninsured drivers raises insurance premia by between 1 2 we also discuss corrective pigouvian taxes

evidence on adverse selection equilibrium signaling and cross subsidization in the insurance market the configuration of equilibrium in the market for automobile collision insurance is examined empirically by representing the premium deductible menu and the demand function as a standard hedonic system using contractual data from a representative insurer we estimate a reduced form hedonic premium equation and the inverse of the marginal bid equation for insurance coverage the data reveal an equilibrium with adverse selection and market signaling but lead us to reject the hypothesis that high risks receive contracts subsidized by low risks

bank size and risk taking under basel ii this paper discusses the relationship between bank size and risk taking under pillar i of the new basel capital accord using a model with imperfect competition and moral hazard we find that small banks and hence small borrowers may profit from the introduction of an internal ratings based irb approach if this approach is applied uniformly across banks however the banks right to choose between the standardized and the irb approaches unambiguously hurts small banks who are pushed towards higher risk taking due to fiercer competition this may even lead to higher aggregate risk in the economy

false diagnoses pitfalls of testing for asymmetric information in insurance markets established tests for asymmetric information in insurance markets are examined the most commonly used that information is symmetric if high and low cover contracts have the same loss rate is inconsistent with standard assumptions that imply that under symmetric information all contracts o er full cover incomplete cover and symmetric information can be reconciled if there are claim processing costs but now existing tests fare badly partly due to the divergence between marginal and average selection effects ignoring the nature of loading factors may cause recent studies to mismeasure the welfare costs of asymmetric information but these problems are remedial

gender weather shocks and welfare evidence from malawi this paper explores the gender differentiated effects of weather shocks on households welfare in malawi using panel data aligned with climatic records results show that temperature shocks severely affect household welfare reducing consumption food consumption and daily caloric intake the negative welfare effects are more severe for households where land is solely managed by women a finding that sheds light on the gender unequal impact of temperature shocks our evidence also suggests that women s vulnerability to temperature shocks is linked to women s land tenure security as temperature shocks impact significantly women s welfare only in patrilineal districts where statistics show that investment in agricultural technologies is lower

gender agricultural production and the theory of the household virtually all models of the household assume that the allocation of resources is pareto efficient within many african households agricultural production occurs on many plots controlled by different members of the household pareto efficiency implies that factors should be allocated efficiently across these plots i find in contrast that plots controlled by women are farmed much less intensively than similar plots within the household controlled by men the estimates imply that about 6 percent of output is lost because of inefficient factor allocation within the household the paper suggests a new approach to modeling intrahousehold allocation consistent with the empirical results

the politics of government decision making a theory of regulatory capture the paper develops an agency theoretic approach to interest group politics and shows the following 1 the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation 2 the threat of producer protection leads to low powered incentive schemes for regulated firms 3 consumer politics may induce uniform pricing by a multiproduct firm 4 an interest group has more power when its interest lies in inefficient rather than efficient regulation where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal congress

the impact of health care reform on hospital and preventive care evidence from massachusetts 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 the number of inpatient admissions originating from the emergency room and preventable admissions at the same time hospital cost growth did not increase

banking across borders abstract the international linkages between banks play a crucial role in today s global economy existing models explain these links largely on the basis of portfolio theory in which banks diversify lending these models have found limited empirical support and do not speak to several relevant dimensions of the data they do not explain heterogeneity in the degree to which banks operate through foreign affiliates fund their activities abroad or matter for local lending in foreign countries this paper proposes a complementary theory of banking across borders that is based on elements of international trade theory in the model banking across borders arises because countries differ in their relative factor endowments and in the efficiency of their banking sectors based on these differences the pattern of foreign bank asset and liability holdings emerges endogenously this parsimonious model provides a rationale for the observed heterogeneity in foreign bank activities and is consistent with key patterns in the data

the gender gap in agricultural productivity the role of market imperfections abstractthis paper hypothesises that labour and credit market imperfections by discouraging off farm income generating activities and restricting access to inputs respectively affect female farm productivity more deeply than male productivity the paper develops a theoretical model which decomposes the contribution of various market imperfections to the gender productivity gap empirically we show that agricultural labour productivity is on average 44 per cent lower on female headed plots than on those managed by male heads 34 per cent of this gap is explained by differences in labour market access and 29 per cent by differences in credit access

capital accumulation and uncertain lifetimes with adverse selection this paper examines the implications of adverse selection in the private annuity market for the pricing of private annuities and the consequent effects on constrption and bequest behavior with privately known heterogeneous mortality probabilities adverse selection causes the rate of return on private annuities to be less than the actuarially fair rate based on population average mortality however a fully funded social security system with compulsory participation can offer an implied rate of return equal to the actuarially fair rate based on population average mortality thus since social security offers a higher rate of return than private annuities consumers cannot completely offset the effects of social security by transacting in the private annuity market using an overlapping generations model with uncertain lifetimes we demonstrate that the introduction of actuarially fair social security reduces the steady state rate of return on annuities and raises the steady state levels of average bequests and average consumption of the young the steady state national capital stock rises or falls according to the strength of the bequest motive this abstract was borrowed from another version of this item

estimating welfare in insurance markets using variation in prices we provide a graphical illustration of how standard consumer and producer theory can be used to quantify the welfare loss associated with inefficient pricing in insurance markets with selection we then show how this welfare loss can be estimated empirically using identifying variation in the price of insurance such variation together with quantity data allows us to estimate the demand for insurance the same variation together with cost data allows us to estimate how insurers costs vary as market participants endogenously respond to price the slope of this estimated cost curve provides a direct test for both the existence and the nature of selection and the combination of demand and cost curves can be used to estimate welfare we illustrate our approach by applying it to data on employerprovided health insurance from one specific company we detect adverse selection but estimate that the quantitative welfare implications associated with inefficient pricing in our particular application are small in both absolute and relative terms

principal agent problems in s l salvage new legislation and traditional fdic insolvency resolution procedures transform and intensify the principal agent problems most responsible for the fslic mess these problems explain counterproductive constraints on the governance and operating policies of the agency responsible for rescuing and salvaging assets in insolvent thrifts the rtc the constraints slow insolvency resolution increase interim financing costs and undermine rtc recovery of asset value operationalizing its task as preserving evanescent and economically misconceived franchise values the rtc allows insolvents to seek financing on an unconsolidated basis initiates bidding for one institution at a time holds back seriously troubled assets and recruits an overly narrow range of bidders although the federal savings and loan insurance corporation fslic is officially defunct its corporate corpse lives on in two successor institutions its deposit insurance business has been taken over by the savings association insurance fund saif while its liquidation or salvage business has been assigned to the resolution trust corporation rtc both saif and rtc have the same stockholder principals federal taxpayers also both are operated by the federal deposit insurance corporation fdic nevertheless their governing structures differ markedly and in a perverse way to maximize net returns from salvage experience suggests the theory that a salvage or value recovery operation requires the aggressive operating flexibility of an automobile junkyard in a junkyard essentially everything in the salvor s inventory is open for inspection stripping and sale to anyone at any time hardto market hulks are compacted into scrap metal i e pooled and shipped out on what can be compared to a bulk sales or auction basis on a strict timetable the yard either owns or transacts with a fleet of tow trucks and has enough operating capital to bring in new wrecks as they appear this paper argues that unlike a private salvor the rtc is saddled with the additional objective of slowing down official recognition of the full size of fslic s losses to this end the financial institutions reform recovery and enforcement act firrea underfunds the rtc requires delayed sales of residential properties ostensibly to promote the availability of affordable housing and creates a superfluous five person rtc oversight board whose incentives are to deprive rtc decisionmakers of desirable operating flexibility the rtc oversight board creates an appearance of improved accountability to taxpayers that runs exactly opposite to its true economic effects three of the

level playing fields in international financial regulation we analyze the desirability of level playing fields in international financial regulation in general level playing fields impose the standards of the weakest regulator upon the best regulated economies however they may be desirable when capital is mobile because they counter a cherry picking effect that lowers the size and efficiency of banks in weaker economies hence while a laissez faire policy favors the better regulated economy level playing fields are good for weaker regulators we show that multinational banking mitigates the cherry picking effect and reduces the damage that a level playing field causes in the better regulated economy

women s empowerment in agriculture implications for technical efficiency in rural bangladesh although a great deal of research exists on gender and agriculture few studies investigate the implications of reduced gender disparities in households for technical efficiency in this article i compare the levels of technical efficiency achieved on plots operated by households with different levels of gender disparities using plot level data from the 2011 2012 bangladesh integrated household survey and drawing on indicators derived from the women s empowerment in agriculture index i estimate a stochastic frontier production function model which includes women s empowerment in agriculture as an exogenous determinant of technical inefficiency i find that reduced gender disparities within households measured in terms of the empowerment gap between spouses are associated with higher levels of technical efficiency this result extends to plots that women jointly manage with their spouses as well as those that women do not actively manage

deposit insurance and subsidized recapitalizations the 2007 2009 financial crisis saw a vast expansion in deposit insurance guarantees around the world and yet our understanding of the design and consequences of deposit insurance schemes is in its infancy we provide a new rationale for the provision of deposit insurance in our model the banking sector exhibits both adverse selection and moral hazard which implies that the social benefits of bank monitoring must for incentive reasons be shared between depositors and banks consequently socially too few deposits are made in equilibrium deposit insurance or equivalently bank recapitalization corrects this market failure we find that deposit insurance should be funded not by banks or depositors but out of general taxation the optimal level of deposit insurance varies inversely with the quality of the banking system hence when the soundness of the financial sector is uncertain governments should consider supporting deposit insurance schemes and undertaking subsidized recapitalizations

perfect competition in markets with adverse selection this paper proposes a perfectly competitive model of a market with adverse selection prices are determined by zero profit conditions and the set of traded contracts is determined by free entry crucially for applications contract characteristics are endogenously determined consumers may have multiple dimensions of private information and an equilibrium always exists equilibrium corresponds to the limit of a differentiated products bertrand game we apply the model to establish theoretical results on the equilibrium effects of mandates mandates can increase efficiency but have unintended consequences with adverse selection an insurance mandate reduces the price of low coverage policies which necessarily has indirect effects such as increasing adverse selection on the intensive margin and causing some consumers to purchase less coverage

pricing regulation and imperfect competition on the massachusetts health insurance exchange abstract we analyze insurance pricing regulation under imperfect competition on the massachusetts health insurance exchange differential markups lead to price variation apart from cost variation coarse insurer pricing strategies identify consumer demand younger consumers are twice as price sensitive as older consumers older consumers thus face higher markups over costs modified community rating links prices for consumers differing in both costs and preferences and changes the marginal consumer firms face stricter regulations transfer resources from low cost to high cost consumers reduce firm profits and increase overall consumer surplus

women s empowerment in agriculture what role for food security in bangladesh summary using a nationally representative survey from bangladesh we examine the relationship between women s empowerment in agriculture measured using the women s empowerment in agriculture index and per capita calorie availability dietary diversity and adult body mass index bmi accounting for potential endogeneity of empowerment we find that increases in women s empowerment are positively associated with calorie availability and dietary diversity at the household level overall household wealth education and occupation are more important than women s empowerment as determinants of adult nutritional status although negative impacts of group membership and credit on male bmi suggest that intrahousehold trade offs may exist

optimal bank reorganization policies and the pricing of federal deposit insurance optimal dynamic regulatory policies for closing ailing banks and for deposit insurance premia are derived as functions of the rate of flow of bank deposits and interest rate on deposits the economy s risk free interest rate and the regulators bank audit administration costs under competitive conditions the threshold assets to deposits ratio below which a bank should be optimally closed is shown to be greater than or equal to one optimal deposit insurance premia and probabilities of bank closure are shown to be nondecreasing in the bank s risk on investment and nonincreasing in the bank s current assets to deposits ratio should regulatory agencies close reorganize an ailing federally insured financial institution if so when the recent record rate of failures of savings and loans associations s ls has renewed the urgency of this question the regulatory agencies are empowered but not required to reorganize financial institutions that are statutorily insolvent i e have zero or negative regulatory net worth recently regulators have in many instances permitted insolvent financial institutions to remain in operation 2 also while debating on the increase of the proposed funding of the federal deposit insurers the u s congress argued whether it would be desirable and if so when to close more s ls thus when regulators should close a troubled financial institution has become a major question of bank regulatory policy while the existing academic literature provides powerful insights into the structure and pricing of the insurers liability this literature offers very little guidance regarding the timing of bank reorganizations 3 indeed to the best of our knowledge the value of the federal

optimal mandates and the welfare cost of asymmetric information evidence from the u k annuity market much of the extensive empirical literature on insurance markets has focused on whether adverse selection can be detected once detected however there has been little attempt to quantify its welfare cost or to assess whether and what potential government interventions may reduce these costs to do so we develop a model of annuity contract choice and estimate it using data from the u k annuity market the model allows for private information about mortality risk as well as heterogeneity in preferences over different contract options we focus on the choice of length of guarantee among individuals who are required to buy annuities the results suggest that asymmetric information along the guarantee margin reduces welfare relative to a first best symmetric information benchmark by about 127 million per year or about 2 percent of annuitized wealth we also find that by requiring that individuals choose the longest guarantee period allowed mandates could achieve the first best allocation however we estimate that other mandated guarantee lengths would have detrimental effects on welfare since determining the optimal mandate is empirically difficult our findings suggest that achieving welfare gains through mandatory social insurance may be harder in practice than simple theory may suggest

top management compensation and capital structure the interrelationship between top management compensation and the design and mix of external claims issued by a firm is studied the optimal managerial compensation structures depend on not only the agency relationship between shareholders and management but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus we analyze in detail the optimal management compensation for the cases when the external claims are 1 equity and risky debt and 2 equity and convertible debt in addition to the role of aligning managerial incentives with shareholder interests managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt the optimal management compensation derived has low pay performance sensitivity with convertible debt instead of straight debt the corresponding optimal managerial compensation has high pay to performance sensitivity a negative relationship between pay performance sensitivity and leverage is derived our results provide a reconciliation of the puzzling evidence of jensen and murphy 1990 with agency theory other testable implications include 1 a relationship between the risk premium in corporate bond yields and top management compensation structures and 2 the announcement effect of adoption of executive stock option plans on bond prices the model yields implications for management compensation in banks and federal deposit insurance reform our results explain the dynamics of top management compensation in firms going through financial distress and reorganization

employers discriminatory behavior and the estimation of wage discrimination this paper considers the linkage of empirical estimates of wage discrimination between two groups introduced by oaxaca 1973 to a theoretical model of employers discriminatory behavior it is shown that conditional on different assumptions about employers discriminatory tastes oaxaca s estimators of wage discrimination can be derived that the approach is more generally useful is demonstrated by deriving an alternative estimator of wage discrimination based on the assumption that within each type of labor e g unskilled skilled the utility function capturing employers discriminatory tastes is homogeneous of degree zero with respect to labor inputs from each of the two groups the estimators are compared empirically in an application to male female wage differentials

charter value minimum bank capital requirement and deposit insurance pricing in equilibrium abstract this paper shows that leaving insolvent banks with large enough charter values open can be optimal and derives normative bank closure reorganization policies based on the liquidation value of assets and the charter value the charter value of a bank is broadly defined as the value that would be foregone due to a closure our simulations of risk taking show that an optimal forbearance for an insolvent bank with a large enough charter value alleviates the moral hazard problem this is because increasing the risk raises the probability of losing the charter value although it generates a moral hazard gain

selection in health insurance markets and its policy remedies selection adverse or advantageous is the central problem that inhibits the smooth efficient functioning of competitive health insurance markets even and perhaps especially when consumers are well informed decision makers and insurance markets are highly competitive and offer choice such markets may function inefficiently due to risk selection selection can cause markets to unravel with skyrocketing premiums and can cause consumers to be under or overinsured in its simplest form adverse selection arises due to the tendency of those who expect to incur high health care costs in the future to be the most motivated purchasers the costlier enrollees are more likely to become insured rather than to remain uninsured and conditional on having health insurance the costlier enrollees sort themselves to the more generous plans in the choice set these dual problems represent the primary concerns for policymakers designing regulations for health insurance markets in this essay we review the theory and evidence concerning selection in competitive health insurance markets and discuss the common policy tools used to address the problems it creates we emphasize the two markets that seem especially likely to be targets of reform in the short and medium term medicare advantage the private plan option available under medicare and the state level individual insurance markets

explaining gender differentials in agricultural production in nigeria this paper uses data from the general household survey panel 2010 11 to analyze differences in agricultural productivity across male and female plot managers in nigeria the analysis utilizes the oaxaca blinder decomposition method which allows for decomposing the unconditional gender gap into i the portion caused by observable differences in the factors of production endowment effect and ii the unexplained portion caused by differences in returns to the same observed factors of production structural effect the analysis is conducted separately for the north and south regions excluding the west of the country the findings show that in the north women produce 28 percent less than men after controlling for observed factors of production while there are no significant gender differences in the south in the decomposition results the structural effect in the north is larger than the endowment at the mean although women in the north have access to less productive resources than men the results indicate that even if given the same level of inputs significant differences still emerge however for the south the decomposition results show that the endowment effect is more important than the structural effect access to resources explains most of the gender gap in the south and if women are given the same level of inputs as men the gap will be minimal the difference in the results for the north and south suggests that policy should vary by region

equity bonds and bank debt capital structure and financial market equilibrium under asymmetric information this paper proposes a model of financial markets and corporate finance with asymmetric information and no taxes where equity issues bank debt and bond financing coexist in equilibrium the relationship banking aspect of financial intermediation is emphasized firms turn to banks as a source of investment mainly because banks are good at helping them through times of financial distress this financial flexibility is costly since banks face costs of capital themselves which they attempt to minimize through securitization to avoid this intermediation cost firms may turn to bond or equity financing but bonds imply an inefficient liquidation cost and equity an informational dilution cost we show that in equilib rium the riskier firms prefer bank loans the safer ones tap the bond markets and the ones in between prefer to issue both equity and bonds this segmentation is broadly consistent with stylized facts

subordinated debt market discipline and bank risk this paper demonstrates that subordinated debt subdebt thereafter regulation can be an effective mechanism for disciplining banks by reducing the chance that managers of distressed banks can take value destroying actions to benefit themselves subdebt regulation may encourage banks to lower asset risk moreover subdebt regulation and bank capital requirements can be complements for alleviating the banks moral hazard problems to make subdebt regulation effective regulators may need impose ceilings on the interest rates of subdebt prohibit collusion between banks and subdebt investors and require subdebt to convert into the issuing bank s equity when the government provides assistance to the bank

investment incentives debt and warrants abstract this paper models and characterizes investment incentive problems associated with debt financing the decision problem of residual claimants is explicity formulated and their investment policies are characterized the paper also analyzes the use of conversion features and warrants to control distortionary incentives these claims reverse the convex shape of levered equity over the upper range of the firm s earnings and this mitigates the incentive to take risk it is shown that under certain conditions such claims can be constructed to restore net present value maximizing incentives and simultaneously meet the financing requirements of the firm

how does the choice of the gender indicator affect the analysis of gender differences in agricultural productivity evidence from uganda summary we use ols and decomposition techniques to investigate gender differences in agricultural productivity in uganda using nationally representative surveys from years 2009 2012 the analysis applies different gender dummies female head of household female plot holder and female plot manager to investigate how the variable of choice affects the calculation of the gender gap our analysis obtains different results depending on the gender variable of choice the study finds that regardless of the variable of choice the gender gap in agricultural productivity decreases or disappears when factors of production and crop choice are controlled for the conditional gender gap is about 10 and significant when using female plot manager as the gender variable while we find no conditional gender gap when using the other gender variables the use of time fixed effects and decomposition contributes evidence that the typically available gender variables are insufficient for identifying how gender and decision making of different household members play a role in productivity this finding is problematic for targeting effective interventions to increase agricultural productivity and reduce gender inequalities in agriculture finally we find that the older status of female heads holders and manager of plots child dependency ratio and limited access to adult male labor are factors decreasing productivity in female plots in uganda

decomposition of gender differentials in agricultural productivity in ethiopia this paper employs decomposition methods to analyze differences in agricultural productivity between male and female land managers in ethiopia it employs data from the 2011 2012 ethiopian rural socioeconomic survey an overall 23 4 percent gender differential in agricultural productivity is estimated at the mean in favor of male land managers of which 10 1 percentage points are explained by differences in land manager characteristics land attributes and unequal access to resources the endowment effect the remaining 13 4 percentage points are explained by unequal returns to productive components but cannot be easily tied to specific covariates these results are mainly driven by non married female managers mainly single and divorced married female managers do not display such disadvantages further analysis along the productivity distribution reveals that gender differentials are more pronounced at mid levels of productivity and that the share of the gender gap explained by the endowment effect declines as productivity increases detailed decomposition of estimates at selected points of the agricultural productivity distribution provides valuable information for policy intervention purposes

adverse selection and an individual mandate when theory meets practice we develop a model of selection that incorporates a key element of recent health reforms an individual mandate using data from massachusetts we estimate the parameters of the model in the individual market for health insurance we find that premiums and average costs decreased significantly in response to the individual mandate we find an annual welfare gain of 4 1 per person or 51 1 million annually in massachusetts as a result of the reduction in adverse selection we also find smaller post reform markups

competitive insurance markets with two unobservables i study a screening game in a competitive insurance market in which insurance customers differ with respect to both accident probability and degree of risk aversion it is shown that indifference curves of customers may cross twice thus the single crossing property does not hold when differences in risk aversion are sufficiently large firms cannot use policy deductibles to screen high risk customers types may be pooled in equilibrium or are separated by raising premiums above actuarially fair levels this leads to excessive entry of firms in equilibrium