Emigration of Skilled Labor under Risk Aversion: The Case of Medical Doctors from Middle Eastern and North African Economies

This is a contribution to the new economics of skilled labor emigration that focuses on the mobility of medical doctors from sending Middle East and North African countries. Economic models under risk neutrality and aversion are used. The findings show that the relative expected benefits and the emigration rate have major effects on the net relative human medical capital that remains in the source country. The effects of relative wages in the destination and sending countries besides the yield of education are likely to change the emigration patterns. Comparisons of theoretical and observed relative human capital per country averages are conducted and ensured the statistical validity of the model. The empirical results based on the available data by Docquier and Marfouk (2006 and 2008) and Bhargava, Docquier and Moullan (2010) allowed further use of the model to understand the current trends in the emigration of medical doctors. These trends confirm the magnitude of relative wages besides the level of education and the attitude toward risk as determinants of the emigration of skilled labor. The countries included in the study are all exhibiting brain gain under 1991-2004 emigration data but two distinct groups of countries are identified. Each country is encouraged to anticipate the likely effects of this emigration on the economy with the increase of health demand, the domestic wages and the increase in education capacity for medical doctors.Medical skilled emigration; wages; human capital, risks.

Playing with Fire? Testing Moral Hazard in Homeowners Insurance Valued Policies

Insurance policy design and regulation continually grapples with moral hazard concerns. Yet these concerns rest largely on theory-based assumptions about how rational economic actors will respond to financial incentives. Advances in behavioral economics call these assumptions into question. This Article conducts an empirical test of moral hazard in homeowners insurance markets. Eighteen states’ “valued policy” laws require more generous compensation by insurers for certain total house losses. I test the moral hazard prediction that fire rates will consequently be higher in these states than in others. Using a private insurance database on the cause of loss for over four million residential insurance claims from 2002 through 2011, I find that, surprisingly, loss rates are significantly lower in valued policy states, not higher. I also use Louisiana’s unexpected elimination of these laws as an additional means to assess the laws’ effects. As before, fire rates are significantly higher when economic incentives appear lower. These results are inconsistent with standard moral hazard predictions, but I demonstrate how they are consistent with a broader conceptualization of moral hazard theory. First, the results show the importance of recognizing policyholders’ responsiveness to irrelevant factors that they nevertheless believe will affect their insurance payments, like housing prices, rather than the low-salience economic factors that truly determine these payments, like valued policy laws. Second, the results show how focusing exclusively on policyholder behavior misses how other actors, like insurance companies, also adjust to mitigate or even entirely eliminate moral hazard considerations

Playing With Fire? Testing Moral Hazard in Homeowners Insurance Valued Policies

Insurance policy design and regulation continually grapples with moral hazard concerns. Yet these concerns rest largely on theory-based assumptions about how rational economic actors will respond to financial incentives. Advances in behavioral economics call these assumptions into question. This Article conducts an empirical test of moral hazard in homeowners insurance markets. Eighteen states’ “valued policy” laws require more generous compensation by insurers for certain total house losses. I test the moral hazard prediction that fire rates will consequently be higher in these states than in others. Using a private insurance database on the cause of loss for over four million residential insurance claims from 2002 through 2011, I find that, surprisingly, loss rates are significantly lower in valued policy states, not higher. I also use Louisiana’s unexpected elimination of these laws as an additional means to assess the laws’ effects. As before, fire rates are significantly higher when economic incentives appear lower.This Article conducts an empirical test of moral hazard in homeowners insurance markets. Eighteen states’ “valued policy” laws require more generous compensation by insurers for certain total house losses. I test the moral hazard prediction that fire rates will consequently be higher in these states than in others. Using a private insurance database on the cause of loss for over four million residential insurance claims from 2002 through 2011, I find that, surprisingly, loss rates are significantly lower in valued policy states, not higher. I also use Louisiana’s unexpected elimination of these laws as an additional means to assess the laws’ effects. As before, fire rates are significantly higher when economic incentives appear lower. These results are inconsistent with standard moral hazard predictions, but I demonstrate how they are consistent with a broader conceptualization of moral hazard theory. First, the results show the importance of recognizing policyholders’ responsiveness to irrelevant factors that they nevertheless believe will affect their insurance payments, like housing prices, rather than the low-salience economic factors that truly determine these payments, like valued policy laws. Second, the results show how focusing exclusively on policyholder behavior misses how other actors, like insurance companies, also adjust to mitigate or even entirely eliminate moral hazard considerations

The Ownership of Health Insurers

Spending by private health insurers exceeds $800 billion and is expected to rise. The Affordable Care Act provides$2 billion in subsidies to jump-start health insurers owned by their policyholders in an attempt to bring these costs under control. Firms with this corporate ownership structure have succeeded in other insurance markets, where Nationwide, Northwestern Mutual, and State Farm are just a few prominent examples. However, the potential of policyholder ownership in health insurance, which is dominated by investor and nonprofit ownership, is poorly understood. This Article applies theories of corporate ownership and control to analyze the strengths and weaknesses of investor, nonprofit, and policyholder health insurer ownership. Theory and an original empirical study of 1,000 individuals’ projected healthcare consumption choices reveal policyholder ownership’s ability to solve contracting failures, reduce overconsumption of medical services, and contribute to “bending the cost curve” of American health expenditures in ways unattainable by investor-owned or nonprofit insurers. The ACA’s provisions for subsidizing policyholder ownership, however, force these firms to adopt restrictive policies that both exacerbate potential governance costs and keep them from maximizing policyholder ownership’s advantages. In fact, the ACA’s requirements force these firms into nonprofit/policyholder-owned hybrid organizations that capture the advantages of neither. Using additional empirical findings, this Article recommends ways that policyholder-owned health insurers could be promoted consistent with sound corporate governance principles

Employer Costs And Conflicts Under The Affordable Care Act

In January 2015, qualified employers must provide health care coverage under the Patient Protection and Affordable Care Act of 2010 or face a fine. As employers actively attempt to minimize the costs that they will incur, the possibility emerges that employers will retaliate against or harass employees who seek coverage. This Essay discusses the protections for employees under the law and the possible deficiencies in the law. It shows that employers and employees often have contrasting incentives – employers to avoid coverage, and employees to take coverage – and these incentives may result in employer harassment and retaliation of employees. Presently, in an analogous context, employees often raise retaliation claims after they have complained of discrimination, and these claims have had significant success. Because of similarities between these situations, comparable retaliation under the ACA is likely, and perhaps it will occur even more due to the significant specific costs that employers face under the ACA

The Government\u27s Role in Climate Change Insurance

There are no robust insurance markets for climate change insurance. While these markets would provide valuable loss-mitigation incentives, at the same time giving financial certainty to individuals and businesses that face staggering future liabilities, existing efforts have produced a fragmented set of private and public products that provide only piecemeal coverage. This symposium contribution examines the government’s role in providing unified markets for insuring climate change risk. Although innovations in reinsurance markets suggest that private insurers could cover discrete risks associated with climate change, such as flood or wind loss, climate change’s broader systemic risks present problems of scale and scope that public insurance is better positioned to handle. I draw lessons from existing insurance programs to show both why purely private insurance would be inappropriate for a robust climate change insurance market, as well as how a nationally provided insurance program could be designed to avoid past problems

Delaware Law for Non-Corporate Entities: A Commentary

Robert Rhee’s Article, The Irrelevance of Delaware Corporate Law, poses provocative questions about why Delaware dominates the market for corporate law given the apparent irrelevance of state incorporation choice for companies’ market valuations. He shows, first, that publicly traded companies incorporated in Delaware have similar valuations to companies incorporated in other states over time, and second, that market actors do not exhibit a preference to reincorporate existing firms in Delaware. Rhee analyzes exclusively the realm of publicly traded corporations, which is understandable given that his analysis is necessarily limited to publicly available data. Publicly traded corporations are undeniably economically significant, yet they constitute only one method of carrying out economic activity that, arguably, is shrinking in importance over time. When one considers the space of non-publicly traded corporations, a different picture emerges. This response considers that space below and then offers some thoughts on how these competing pictures might be reconciled

Broadening the Use of Municipal Mortgages

This Comment considers whether states and municipalities might benefit from altering prevailing practices regarding security interests and bond issues. After reviewing the primary methods of municipal bond financing and their current treatment by courts, the Comment argues for a broader use of municipal property as collateral for bonds, suggesting the typical connection between revenue stream and revenue source with revenue bonds be broken, and that property be attached to general obligation bonds. The Comment proceeds by exploring some policy implications related to its proposal and concludes that expanded power may be in municipalities’ best interests

Protecting LLC Owners While Preserving LLC Flexibility

LLC statutes allow owners to restrict or completely waive standard governance protections required of other business forms. Corporate law mandatory stalwarts like fiduciary duties can be entirely eliminated in an LLC. This flexible approach has the potential to generate the most efficient governance relationships: tailored negotiation among LLC investors can produce an optimal set of governance terms that corporate law’s mandatory protections cannot. Yet when owners lack sophistication or bargaining power, contractual freedom allows for opportunistic terms that misprice capital, reduce investment, and inefficiently allocate capital across LLCs. A series of cases involving opportunistic conduct have brought this problem to the fore. Recommendations for reform have focused on doing nothing, imposing mandatory protections, or relying on ad-hoc judicial interventions, but these solutions are each ultimately unsatisfying. I ultimately show how a model inspired by securities law’s accredited investor concept has the most promise to ensure LLCs’ continued viability as a distinct organizational form, with favorable liability and tax treatment to everyday investors and the freedom to craft unique governance relationships for sophisticated ones

The Puzzling Lack of Cooperatives

Some of the most recognizable companies, including Land O\u27Lakes, REI, the Associated Press, Ace Hardware, and State Farm Insurance, are organized as cooperatives--firms owned by their suppliers, workers, or customers. Yet aside from isolated areas of the economy, cooperatives constitute only a small portion of American enterprise, which is otherwise dominated by investor-owned firms. Conventional wisdom assumes that firms either start as cooperatives or convert to cooperatives when cooperatives offer the highest ongoing benefits to owners, and it explains the lack of cooperatives by suggesting that cooperatives usually do not maximize ongoing benefits. This Article looks at entrepreneurs\u27 and brokers\u27 actions when starting or converting firms. It finds that the conventional assumption is often violated. Starting a cooperative is similar to supplying a public good, and just as unsubsidized public goods are underprovided, so too are unsubsidized cooperative starts. Additionally, a lack of viable brokering institutions prevents most existing firms from converting to cooperatives even when cooperatives promise the highest ongoing benefits. These findings explain cooperatives\u27 low market share and several empirical observations that are inconsistent with the conventional wisdom. The results suggest social welfare could be improved if cooperatives were subsidized, through favorable tax treatment, grants, or regulatory intervention like ABA rules requiring law firms to be owned by lawyers. They also question the shareholder primacy model of corporate governance. The Article closes by briefly considering the Affordable Care Act\u27s current $2 billion subsidization of health insurance cooperatives