Does asymmetric information matter in the early insurance market? Evidence from the auto insurance market

In the late 1960s, the performance of automobile insurance declined dramatically in Japan in spite of rapid growth in the diffusion rate, and the premiums were sharply raised several times in order to improve the situation. This observation indicates the possible presence of adverse selection (death spiral), and provides an ideal situation for assessing informational asymmetry. Using bodily injury liability (BIL) insurance data from 46 Japanese prefectures over the period 1966 to 1975, this article tests two hypotheses of adverse selection: (i) high-risk drivers were more likely to join the BIL insurance market and (ii) sharp premium increases drove low-risk policyholders away. Various empirical analyses show that there is little evidence for either type of adverse selection. We also test whether a risk-misperception hypothesis can explain our results, and find some evidence that the population density have a significantly positive impact on the demand for BIL insurance.     

Does non-employment based health insurance promote entrepreneurship? Evidence from a policy experiment in China

Previous researchers have shown that employment-based health insurance lowers job mobility and deters entrepreneurship. The Urban Resident Basic Medical Insurance (URBMI) program, piloted in 2007 in China and fully established in 2009, offers health insurance to about 271 million urban residents without formal employment. Before the implementation of URBMI, most urban residents obtained health insurance through their employers, and therefore a large number of unemployed and self-employed individuals were uninsured. Thus, URBMI creates a new insurance option that does not depend on formal employment and may promote entrepreneurship. We take advantage of this policy change to evaluate the effect of URBMI on self-employment. Using 2000–2011 data from the China Health and Nutrition Survey and a difference-in-differences approach with propensity score weighting, we found that URBMI increased self-employment rate by at least 8.73% for the overall population. The result was mainly driven by the URBMI’s impact on unhealthy workers, individuals with 12 years of schooling or less, and workers above 30 years old.     

Does health insurance reduce illness-related worker absenteeism?

The objective of this article is to examine whether having health insurance reduces illness-related absenteeism among older workers. A nationally representative sample of 1780 workers in the United States, aged 52–64, are drawn from the 2004–2006 Health and Retirement Study (HRS). Binary logistic regressions and censored Tobit models are estimated for workers’ likelihood of missing work days due to illness and the number of illness-related work days missed, respectively, while explicitly addressing the possibility of insurance-selection effects. The findings suggest that over a 12-month period, older workers without health insurance are as likely as insured workers to miss work days due to illness and there are no differences in the number of days missed between insured and uninsured workers. However, there is strong evidence that poor baseline health, onset of new diseases and longer hospitalization significantly increase an older worker's absenteeism at work. These results suggest that having health insurance does not affect illness-related absenteeism among older workers in the US. Future research examining other aspects of worker productivity, such as ‘presenteeism’, and the longer term effects of insurance on productivity can extend our understanding of the role of health insurance in the workplace.     

Does simplifying divorce and marriage registration matter? Evidence from China

This article evaluates the marital consequences of easier access to divorce and marriage by exploiting a major policy change in China that simplifies both. I first use a regression discontinuity design to examine the short-run effect and find that simplified registration immediately triggered more and faster divorces and marriages. In estimating the long-run effect, I adopt a difference-in-differences strategy that further exploits cross-sectional variation in urbanization rate. Results indicate that the positive effect on marital outcomes, especially on marriage rate, persisted in the medium run for 4 years.     

Is health care a necessity or a luxury? Evidence from urban China

This article uses a smooth transition regression (STR) model to research the income elasticity of the health care expenditure of China’s urban residents in the 1990–2013 period. The results demonstrate that if the real income of China’s urban residents that lags a period is taken as a transition variable, urban residents’ health expenditure follows an LSTR1 nonlinear two-regime model. Here, the income elasticity of health care expenditure of China’s urban residents is 1.4919 in 1990–2002 and 1.2216 in 2003–2013. Overall, the income elasticity of health care of China’s urban residents is greater than 1, indicating that health care is a luxury.     

Does technological diversification matter for regional innovation capability? Evidence from China

This study empirically examines the relationship between technological diversification and regional innovation capability (RIC) based on 30 Chinese provinces from 2001 to 2011. Our results support the positive role of technological diversification in affecting RIC. We also investigate the moderating effects of R&D investments and openness on the diversification-innovation relationship. The results indicate that R&D investments exert a positive effect on RIC, while openness, measured as foreign direct investment, exerts a negative influence on RIC. We thus argue that the positive diversification-innovation relationship is contingent on multiple factors. Both policy and practical implications are discussed.     

Does geopolitical risk matter for corporate investment decisions? Evidence from cross-border acquisitions

Heightened geopolitical risk has become the new normal. We study the effects of geopolitical risks on cross-border acquisition activity. Using military alliance to proxy for the degree of geopolitical risks, we find that the formation of military alliance between two countries is associated with greater cross-border acquisition flows. Using the recent North Atlantic Treaty Organization enlargements as identification strategy, we find stronger effects of military alliance, especially with defense pacts. One important channel is that military alliance can substitute for target countries’ institutional quality and minimize extreme geopolitical threats faced by acquirers. We find that countries with poor governance and weaker legal enforcement benefit more from military alliance, especially by receiving inbound acquisitions from major military powers. These findings highlight the role of military alliance in the global market for corporate control by reducing geopolitical risks.     

Does preschool education attendance matter? Evidence from a natural experiment in Spain

The non-compulsory and non-free of charge character of preschool education level before 3 years old in Spain raises some doubts about the exogenous nature of this variable. This article provides new evidence about the impact of preschool years on educational outcomes by exploiting a peculiar Spanish database that supplies information on two classrooms at fourth grade in primary schools where students were randomly allocated into each group. Using an identification strategy that reproduces a natural experiment, we find that belonging to the group with more average years of preschool education significantly and positively impacts on fourth-grade students’ average outcomes. Particularly, an increase of one standard deviation in the difference in years of preschool attendance results in an increase of 0.16 (0.13) standard deviations in the group achievement for mathematics (reading). In view of the importance of preschool education and considering that preschool attendance before 3 years old is related with socio-economic variables, we conclude that extending free preschool education to the 2-year-old age group in Spain should be considered especially for students in families with less favourable backgrounds.     

Does legal system matter for directed technical change? Evidence from the auto industry

Does the effect of fuel taxes on clean innovations (e.g. hybrid technology) depend on the legal system’s rigidity? Using 1986–2005 data from more than 1900 firms, evidence suggests that auto-industry firms located in civil law (with more rigid laws) countries increase clean technology patenting more than common law (with more flexible laws) firms when the tax-inclusive fuel price rises. A rigid legal system appears to raise clean technology innovation.     

Does paternity leave matter for female employment in developing economies? Evidence from firm-level data

Analysis using firm-level data for a sample of 33,302 firms in 53 developing countries shows that women’s employment among private firms is significantly higher in countries that mandate paternity leave versus those that do not. A conservative estimate suggests an increase of 6.8 percentage points in the proportion of women workers associated with mandating paternity leave. The empirical specification is immune to spurious correlations that affect the level of women and men employment equally and also robust to a large number of controls for country and firm characteristics.     

The impact of health insurance on households’ financial choices: Evidence from Vietnam

This paper investigates the impact of health insurance on families' financial service choices in Vietnam using TVSEP data from three waves in 2013, 2016, and 2017. The endogeneity is handled via a recursive multivariate probit model. The findings indicate that while health insurance has no effect on private health insurance, it has a positive effect on savings and investments and a negative effect on credit choice. The multivariate probit model's results are robust to both the instrumental variable two-stage least squares model and the bivariate probit model. In addition, correlations between error components in financial service choice equations indicate a possible pattern of household financial usage. The results suggest that health insurance improves households' financial well-being. The implication of the findings is that when developing social security policies aimed at achieving universal health insurance, the influence of health insurance on household finances should not be underestimated.     

Does Disclosure Reduce Pollution? Evidence from India’s Green Rating Project

Public disclosure programs that collect and disseminate information about firms’ environmental performance are increasingly popular in both developed and developing countries. Yet little is known about whether they actually improve environmental performance, particularly in the latter setting. We use detailed plant-level survey data to evaluate the impact of India’s Green Rating Project (GRP) on the environmental performance of the country’s largest pulp and paper plants. We find that the GRP drove significant reductions in pollution loadings among dirty plants but not among cleaner ones. This result comports with statistical and anecdotal evaluations of similar disclosure programs. We also find that plants located in wealthier communities were more responsive to GRP ratings, as were single-plant firms.     

Can bribery buy health? Evidence from post-communist countries

Corruption is pervasive, but we know little about its effects on individual lives. Using individual-level data from 28 post-communist countries, we demonstrate that bribing for public services worsens self-assessed health. We account for endogeneity of bribery and show that bribing for any type of public service, not just for health services, has an adverse impact. We also find that bribery lowers the quality of services received. Moreover, there are potentially high indirect costs of bribery since, as we show, it comes at the expense of cutting food consumption. These findings suggest that corruption is a potentially important source behind the poor health outcomes in many developing countries.     

More health care utilization with more insurance coverage? Evidence from a latent class model with German data

We analyse the impact of optional deductibles, private supplementary health insurance and income on the demand for health care utilization, measured as the number of physician visits with data from the German Socio-Economic Panel (SOEP). With a set of newly available variables for the years 2002, 2004 and 2006 that measure individual health more accurately and including risk-attitudes towards health we find that possible endogeneity of the insurance choice is not a problem. A latent class approach that takes into account the panel structure of the data reveals that especially individuals who have few doctor visits, the low users, respond strongest to insurance status and income. In this group we find that more insurance increases the demand for physician visits and there is a pro-rich inequity in health care utilization. No such effects are found for the high users.     

Does services liberalization affect manufacturing firms’ export performance? Evidence from India

This paper investigates the relationship between the reform of energy, telecommunications and transport services in India in the mid-1990s and manufacturing firms’ export performance. The empirical analysis relies on exogenous indicators of regulation of Indian services sectors and detailed firm-level data from India in the 1994–2004 period. I find that the reform of upstream services sector has increased the probability of exporting and export sales shares of firms producing in downstream manufacturing industries. The results suggest that the effect of services liberalization on manufacturing firms’ export performance is stronger for initially more productive firms. These empirical findings are robust to alternative econometric specifications that control for other reforms, industry, firm characteristics and that deal with potential reverse causality concerns.     

Do national political parties matter? Evidence from Italian municipalities

Recently several countries have experienced a drop in popularity of national political parties, accompanied by the success of independent movements (e.g. “Civic Lists” in Italy). I exploit the success of “Civic Lists” in Italian municipalities and use them as a comparison group for party-affiliated politicians, to test whether national parties affect fiscal discipline. Using a Regression Discontinuity Design (RDD), I show that party-affiliated mayors are more fiscally responsible: they run lower deficits, accumulate less debt and reduce expenditures. The effect is significant only for municipalities not constrained by fiscal rules. This suggests that national parties act as a substitute for fiscal rules in constraining politicians. Besides, I provide evidence that the discipline of party-affiliated politicians is linked to better career prospects: party-affiliated mayors have a higher probability of being re-elected and better chances of being promoted to higher levels of government. Alternative stories find less support in the data.     

Does Women’s Labor Force Participation Reduce Domestic Violence? Evidence from Jordan

Enhancing women’s labor force participation is seen as a way to promote their empowerment and improve their well-being and that of their children. The empirical literature on the relationship between women’s employment status and domestic violence is less clear-cut. Using quantitative data from Jordan in 2007, this study explores the effect of women’s employment, as measured by their participation in paid work outside the home, on reported domestic violence, controlling for the potential endogeneity of women’s employment, which might bias the relationship between employment and domestic violence. Without taking endogeneity into account, the regression results suggest that a woman’s participation in paid work enhances violence by her husband. After controlling for endogeneity, these results turn out to be insignificant, which suggests that women’s work status has no causal influence on marital violence. Differentiating between various types of domestic violence provides weak evidence that women’s employment lowers sexual violence.     

Does high‐speed rail connection really promote local economy? Evidence from China’s Yangtze River Delta

High‐speed rail (HSR) has led to a transportation revolution in China. This paper uses the county‐level panel data of China’s Yangtze River Delta to investigate the effect of HSR connection on local economy. To address the issue of endogenous HSR route placement, we use a straight‐line strategy to construct potential HSR connection variables as instrumental variables of the actual HSR connection. Both the difference‐in‐differences and instrumental variable methods show that HSR connection impedes local economy, especially in peripheral regions. The impediment effect is channeled through population reallocation from peripheral to core areas and the restructuring of industries.     

Does corruption hinder investment? Evidence from Russian regions

This paper investigates the relationship between corruption and fixed capital investment in the setting of a corrupt country. Using different measures of corruption – registered cases of bribe taking and incidents of experienced corruption by the population – we find a negative relationship between investment and corruption. We then address the problem of endogeneity of corruption using an instrumental variables approach: when corruption is instrumented with freedom of the press and violations of journalists' rights, we find an even bigger negative effect. Disaggregating investment by ownership-type shows that only private investment is affected by corruption, but not investment made by state-owned companies. The negative effect is larger for companies with full or partial foreign ownership. Additionally, we look at the relationship between corruption and foreign direct investment (FDI): similar to the investment in fixed capital, we find a negative relationship; however, its statistical significance varies across specifications with different data sources for FDI and different corruption measures.