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Conference on Social Insurance.

Conference on Social Insurance

Over 70 economists from the United States, Canada, and other countries gathered in Cambridge on April 28-9 for an NBER-Universities Research Conference on "Social Insurance." Research Associate B. Douglas Bernheim of Northwestern University organized the following program:

Jack Carr and Frank Mathewson, University of

Toronto, "The Effect of Deposit Insurance on Financial


Discussants: Lawrence Benveniste, Northwestern

University, and Anjan Thakor, Indiana University

Bruce D. Meyer, NBER and Northwestern University,

"An Event Study Approach to the Effects of

Unemployment Insurance"

Discussants: Walter Nicholson, Amherst College,

and Gary Solon, University of Michigan

Patricia M. Danzon, University of Pennsylvania,

"Mandated Employment-Based Health Insurance:

Incidence and Efficiency Effects"

Discussants: Georges Dionne, University of

Montreal, and Mark Schlesinger, Harvard University

Donald Cox, Boston College, and George H.

Jakubson, Cornell University, "The Connection between

Public Transfers and Private Interfamily Transfers"

Discussants: Paul Menchik, Michigan State

University, and James Andreoni, University of Wisconsin

Philip de Jong, University of Leiden; Robert H.

Haveman, University of Wisconsin; and Barbara Wolfe,

NBER and University of Wisconsin, "Labor and

Transfer Incomes and Older Women's Work:

Estimates from the United States" (NBER Working

Paper No.2728)

Discussants: David Card, NBER and Princeton

University, and Joseph Quinn, Boston College

Donald O. Parsons, Ohio State University, "Social

Insurance and Imperfect State Verification"

Discussants: Rebecca M. Blank, NBER and Princeton

University, and Eytan Sheshinski, Hebrew


Alan B. Krueger, NBER and Princeton University, and

Jorn-Steffen Pischke, Princeton University, "The

Effect of Social Security on Labor Supply: A

Cohort Analysis of the Notch Generation"

Discussants: Marjorie Honig, Hunter College, and

Wayne Vroman, The Urban Institute

David Altig, Indiana University, and Steve J. Davis,

University of Chicago and Stanford University,

"Altruism, Borrowing Constraints, and Social


Discussants: Andrew B. Abel, NBER and University

of Pennsylvania, and James Davies, University of

Western Ontario

Carr and Mathewson examine the impact of deposit insurance on the financial structure of deposit-taking firms. Using Canadian data on financial intermediaries after the introduction of deposit insurance in 1967, Carr and Mathewson find that average debt-to-equity ratios rise substantially for those classes of firms in which entry is greatest. In Canada, firm failures have increased; most of those failing were incorporated after 1967. Carr and Mathewson believe that deposit insurance serves private and not public interests.

Meyer uses data from five states during 1979-84 to estimate the effects of higher unemployment insurance benefits on the duration of unemployment and on wages in the next job. Sixteen increases in benefits, averaging about 9 percent, increased the length of unemployment spells by about one-and-one-half weeks. The post-unemployment earnings of individuals seemed to fall slightly, but Meyer's estimates are not precise. Individuals who expected to be recalled by a previous employer had larger increases in the number of weeks of unemployment when benefits rose than other unemployed workers.

Mandatory employment-based (MEB) health insurance coverage for all workers is being considered by state and federal governments, and has recently been enacted in Massachusetts. According to Danzon, mandating coverage of all full-time employed workers and their dependents would cover 51 percent of the currently uninsured, for a net new public cost of $0.8 billion in tax expenditures. By contrast, a program that covers all the uninsured poor and near poor through Medicaid or a catastrophic program would cover 53 percent of the uninsured but would cost $7.8 billion. The reason for this tremendous differential is that most costs are borne by individuals under the first plan, while the federal government pays for the bulk of the second plan. Danzon suggests that MEB would shift some costs from small to large firms. Costs within firms also would shift between high- and low-risk individuals and between families and individuals.

Cox and Jakubson ask if public transfers displace transfers provided by family members and friends (private transfers). Using 1979 data collected by the President's Commission on Pension Policy for over 4000 families, Cox and Jakubson simulate a model that eliminates public transfers. They find that only a small portion of the lost family income would be replaced by private transfers.

De Jong, Haveman, and Wolfe estimate the effects of available disability transfer income on the decisions of older women about whether to work. They find that a 40 percent increase in the prospective level of total government disability transfer payments--including Social Security Disability Insurance (SSDI)--would produce only a 5 percent decrease in the labor force participation of older married women and a 13 percent decrease for older female heads of households. Since SSDI benefits are about 40 percent of total disability transfers, they would have to double to produce this same impact on the labor force participation of older women. Therefore, the actual increases in SSDI benefits since the 1960s have only slightly decreased the number of older women who work outside the home.

Parsons considers the design of an optimal social insurance program when state verification is feasible, but imperfect. For example, the Social Security disability system rejects approximately one-half of those who claim to be totally disabled, but the disability screening mechanism is imperfect, with a classification error of perhaps 20 percent. Other things equal, the severely disabled would prefer a program that would not reject them. However, if program resources are limited and the screening technology is imperfect, even that target group might prefer an active screening policy. A positive screening policy also may be optimal if rigorous screening reduces the application rate of ineligible claimants.

The 1977 amendments to the Social Security Act created a substantial, unanticipated differential in benefits for otherwise identical individuals who were born either before or after 1917. This differential has become known as the benefit notch. Krueger and Pischke find that the downward trend in labor supply continued for the "notch babies," even though they received lower Social Security benefits than earlier cohorts did.

Altig and Davis show how gifts between parents and children and constraints on borrowing can affect the response of saving and economic welfare to funded and unfunded Social Security programs. Borrowing constraints pin down the optimal timing of altruistic transfers between generations and have profound implications for fiscal policy in economies with altruistic agents. If children make gifts to their parents, then Social Security programs have little impact on the interest rate, regardless of whether borrowing constraints bind and regardless of whether parents make gifts to their children.
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Title Annotation:Conferences
Publication:NBER Reporter
Date:Jun 22, 1989
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