Redistributive taxation and social insurance under adverse selection in the insurance market

This paper extends the analysis of optimal income taxation under uncertainty studied by Cremer and Pestieau (International Tax and Public Finance, 3, 281–295, 1996). We introduce asymmetric information in the insurance market whereby private insurance companies cannot identify the risk probability of the agents, and we examine its effect on public policy. We consider the separating equilibrium of Rothschild and Stiglitz (Quarterly Journal of Economics, 90, 629–649, 1976) and Riley (Econometrica, 47, 331–359, 1979) where the low risk agent is only partially insured. The presence of the distortion in the insurance market changes the affinity of labor, and in some cases, we show that the scope of redistribution and the resulting social welfare are higher under asymmetric information than under full information. We also show that the increase in social insurance affects the utility and labor incentive of the low risk type by relaxing the self-selection constraint in the insurance market. The policy implications of the redistributive taxation and social insurance are analytically and numerically examined.      

Technological Progress and the Wage Growth of Older Japanese Workers

Declining birth and mortality rates are leading to population aging throughout the OECD countries. This paper examines one possible consequence for national productivity – we ask: Are older workers able to take advantage of new technologies as effectively as their younger counterparts? Using Japanese data for 1973-2000, we find that if we ignore job tenure, workers beyond the age of 50 do not seem as able to benefit from total factor productivity growth as their younger colleagues. However, Japanese workers past age 50 move to lesser paying positions more frequently than is common elsewhere, and we believe that the complete answer to our question depends upon whether an inability to keep up with new technologies induces late-in-career job changes or whether the changes follow, in practice, from other factors.     

Cost-effectiveness analysis of suvorexant for the treatment of Japanese elderly patients with chronic insomnia in a virtual cohort

Aims: This study assessed the cost-effectiveness of the orexin receptor antagonist suvorexant against zolpidem, the most widely used hypnotic benzodiazepine receptor agonist in Japan. To this end, a model was used that factored in insomnia and the risk for hip fractures, which have devastating effects on the elderly.

Methods: Data were derived from published papers. The target population was a virtual cohort of elderly patients (≥65 years) with insomnia residing in Japan. Cost-effectiveness was evaluated using quality-adjusted life years (QALYs) and the incremental cost-effectiveness ratio as effectiveness measures. The investigators assumed the perspective of healthcare payers.

Results: In the base-case analysis, suvorexant was cost-saving (suvorexant: $252.3, zolpidem: $328.7) and had higher QALYs gained (suvorexant: 0.0641, zolpidem: 0.0635) for elderly Japanese patients with insomnia compared with zolpidem, indicating that suvorexant was dominant. In the sensitivity analysis, the outcome changed from dominant to dominated due to the relative risk for hip fractures associated with suvorexant. However, when the other parameters were varied from the lower to the upper limits of their ranges, suvorexant remained dominant compared to zolpidem.

Limitations: The relative risk for hip fractures for suvorexant used in the model was based on data from pre-approval clinical trials. More precise data may be needed.

Conclusions: Suvorexant seemed to be more cost-effective than the alternative zolpidem. The findings suggested that suvorexant might be a viable alternative to zolpidem for elderly patients with insomnia. A sensitivity analysis showed that outcome varied depending on the relative risk for hip fractures associated with suvorexant. Further investigations may be needed for more precise results.     

Voluntary redistribution mechanism in asymmetric coordination games

Experimental Economics - An inequality game is an asymmetric 2 × 2 coordination game in which player 1 earns a substantially higher payoff than player 2 except in the inefficient Nash...