Longevity Risk

Most of the western world has seen a steady increase in the average lifetime of its inhabitants over the past century. Although the past trends suggest that further changes in mortality rates are to be expected, considerable uncertainty exists regarding the future development of mortality. This type of uncertainty is referred to as longevity risk. This paper reviews the current state of the literature concerning longevity risk. First, we discuss the modeling of future mortality, including the Lee and Carter (J Am Stat Assoc 87:659–671, 1992)-approach, as well as other approaches. Second we discuss the importance of longevity risk for the solvency of portfolios of pension and life insurance products. Finally, we investigate possibilities for longevity risk management. In particular, we consider longevity risk management through securitization and/or pension and insurance (re)design.     

Perceived and actual option values of college enrollment

An important feature of postsecondary schooling is the experimentation that accompanies sequential decision making. Specifically, by entering college, a student gains the option to decide at a future time whether it is optimal to remain in college or to drop out, after resolving uncertainty that existed at entrance about factors that affect the return to college. This paper uses data from the Berea Panel Study to quantify the value of this option. The unique nature of the data allows us to make a distinction between “actual” option values and “perceived” option values and to examine the accuracy of students' perceptions.     

Optimal social security claiming behavior under lump sum incentives: Theory and evidence

Many Americans claim Social Security benefits early, though this leaves them with lower monthly payments throughout retirement. We build a lifecycle model that closely tracks claiming patterns under current rules, and we use it to predict claiming delays if, by delaying benefits, people were to receive a lump sum instead of an annuity. We predict that current early claimers would defer claiming by a year given actuarially fair lump sums, and the predictions conform with respondents' answers to a strategic survey about the lump sum. In other words, such a reform could provide an avenue for encouraging delayed retirement without benefit cuts or tax increases. Moreover, many people would still defer claiming even for smaller lump sums.     

Long-Term Climate Treaties with a Refunding Club

Environmental and Resource Economics - We show that an appropriately-designed “Refunding Club” can simultaneously solve both free-riding problems in mitigating climate...     

Stochastic differential equation modeling the prevalence of rare chronic diseases with an application to systemic lupus erythematosus

In this article we describe a system of stochastic differential equations to model the age‐specific prevalence of rare chronic diseases from incidence and mortality rates. As an application, the age profile of the prevalence of systemic lupus erythematosus in England and Wales in1995 is calculated. The results are in good agreement with the observed epidemiological measures.     

Local Administration Reform in Estonia: Alternatives from an Economic Point of View

As the Estonian experience with local taxes has turned out in the last decade small rural municipalities have not been able to profit from the right to collect local taxes. Tax collecting and administrative costs have been too high. Therefore the local administrative system did not succeed and developed into a grants-in-aid system during the transition process. But from an allocational point of view such a development is not satisfactory. Incentives for local governments to save taxpayers' money and to seek new industrial establishments intensively are lacking. Only an administrative system characterised by institutional competition can solve these problems. In this article the advantages of institutional competition between local jurisdictions in Estonia are discussed. Additionally, a concrete system of competing enlarged counties is recommended.     

Estimating the benefits of farm animal welfare legislation using the contingent valuation method

This paper presents the method and findings of a contingent valuation (CV) study that aimed to elicit United Kingdom citizens' willingness to pay to support legislation to phase out the use of battery cages for egg production in the European Union (EU). The method takes account of various biases associated with the CV technique, including ‘warm glow’, ‘part‐whole’ and sample response biases. Estimated mean willingness to pay to support the legislation is used to estimate the annual benefit of the legislation to UK citizens. This is compared with the estimated annual costs of the legislation over a 12‐year period, which allows for readjustment by the UK egg industry. The analysis shows that the estimated benefits of the legislation outweigh the costs. The study demonstrates that CV is a potentially useful technique for assessing the likely benefits associated with proposed legislation. However, estimates of CV studies must be treated with caution. It is important that they are derived from carefully designed surveys and that the willingness to pay estimation method allows for various biases.     

The 1996 FAIR Act: Measuring the Impacts on Land Leasing

Using a 1997 survey of Arkansas farm operators, Federal Agricultural Improvement and Reform (FAIR) Act impacts on changes in cropping mixes on leased land, operator attitudes concerning the sharing of FAIR Act benefits with landlords, and changes in leasing arrangements due to the FAIR Act are investigated. Operators indicated that the FAIR Act caused cropping-mix changes on 24% of surveyed leases. Although some operators believe that landlords disproportionately benefit from the FAIR Act, about three-quarters feel that there was no change or had no opinion. Similarly, we find little evidence that leasing arrangements changed as a result of the FAIR Act.     

Economic Analysis at the Federal Communications Commission, 2012–2013

Pointing to the role of economic analysis, this article reviews major Federal Communications Commission actions and initiatives that are related to universal service support in high-cost areas that are served by price-cap incumbent local exchange carriers, special access policy, secondary market spectrum transactions, spectrum reassignments, and rules that govern interoperability among certain licensees in the 700 MHz band and spectrum ownership. Also discussed are activities of the recently created Technology Transitions Policy Task Force and challenges to communications policy that are posed by the transition to voice over internet protocol interconnection.