The net effects of medical malpractice tort reform on health insurance losses: the Texas experience

In this paper, we examine the influence of medical malpractice tort reform on the level of private health insurance company losses incurred. We employ a natural experiment framework centered on a series of tort reform measures enacted in Texas in 2003 that drastically altered the medical malpractice environment in the state. The results of a difference-in-differences analysis using a variety of comparison states, as well as a difference-in-difference-in-differences analysis, indicate that ameliorating medical malpractice risk has little effect on health insurance losses incurred by private health insurers

Time preferences and risk aversion: tests on domain differences

The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental outcomes is a prime component in designing effective environmental policy to address issues of environmental sustainability, such as climate change. Our objective in this study is to investigate whether subjects' time preferences and risk aversion across the monetary domain and the environmental domain differ. Crucially, our experimental design is incentivized: in the monetary domain, time preferences and risk aversion are elicited with real monetary payoffs, whereas in the environmental domain, we elicit time preferences and risk aversion using real (bee-friendly) plants. We find that subjects' time preferences are not significantly different across the monetary and environmental domains. In contrast, subjects' risk aversion is significantly different across the two domains. More specifically, subjects (men and women) exhibit a higher degree of risk aversion in the environmental domain relative to the monetary domain. Finally, we corroborate earlier results, which document that women are more risk averse than men in the monetary domain. We show this finding to, also, hold in the environmental domain

Measuring loss aversion under ambiguity: a method to make prospect theory completely observable

We propose a simple, parameter-free method that, for the first time, makes it possible to completely observe Tversky and Kahneman’s (1992) prospect theory. While methods exist to measure event weighting and the utility for gains and losses separately, there was no method to measure loss aversion under ambiguity. Our method allows this and thereby it can measure prospect theory’s entire utility function. Consequently, we can properly identify properties of utility and perform new tests of prospect theory. We implemented our method in an experiment and obtained support for prospect theory. Utility was concave for gains and convex for losses and there was substantial loss aversion. Both utility and loss aversion were the same for risk and ambiguity, as assumed by prospect theory, and sign-comonotonic trade-off consistency, the central condition of prospect theory, held

Flood Proofing Low-Income Houses in India: an Application of Climate-Sensitive Probabilistic Benefit-Cost Analysis

Poor communities in high risk areas are disproportionately affected by disasters compared to their wealthy counterparts; yet, there are few analyses to guide public decisions on pro-poor investments in disaster risk reduction. This paper illustrates an application of benefit-cost analysis (BCA) for assessing investments in structural flood proofing of low-income, high-risk houses. The analysis takes account of climate change, which is increasingly viewed as an important consideration for assessing long-term investments. Specifically, the study focuses on the Rohini river basin of India and evaluates options for constructing non-permanent and permanent residential structures on a raised plinth to protect them against flooding. The estimates show a positive benefit-cost ratio for building new houses on a raised plinth, while the ratio is less than one for demolishing existing houses to rebuild on a raised plinth. Climate change is found to significantly affect the BCA results. From a policy perspective, the analysis demonstrates the potential economic returns of raised plinths for ‘building back better’ after disasters, or as a part of good housing design practice

Are individuals more risk and ambiguity averse in a group environment or alone? Results from an experimental study

Most decision-making research in economics focuses on individual decisions. Yet, we know, from psychological research in particular, that individual preferences can be sensitive to social pressures. In this paper, we study the impact of a group environment on individual preferences for risky (i.e., known probabilities) and ambiguous (i.e., unknown probabilities) prospects. In our experiment, each participant was invited to make a series of lottery-choice decisions in two different conditions. In the Alone condition, individuals made private choices, whereas in the Group condition, individuals belonged to a three-person group and group members' choices were aggregated according to either a majority or unanimity rule. This design allows us to study the impact of a group environment on individuals' attitude towards both risky and ambiguous prospects, while controlling for the decision rule used in the group. Our experimental results show that when individuals are in the Group condition, they tend to be less risk averse and more ambiguity averse than when they are not part of a group (Alone condition). Our experiment also suggests that the decision rule matters as it shows that these two trends tend to be stronger when the group implements a unanimity rule. Specifically, we found that individuals who belong to a group implementing a unanimity rule are significantly less risk averse than individuals who belong to a group that relies on the majority rule. We obtained a similar-but non-significant-result under ambiguity

Blood pressure and cholesterol level checks as dynamic interrelated screening examinations

This study analysed the determinants of screening uptake for blood pressure and cholesterol level checks. Furthermore, it investigated the presence of possible spillover effects from one type of cardiovascular screening to another type of cardiovascular screening. A dynamic random effects bivariate panel probit model with initial conditions (Wooldridge-type estimator) was adopted for the estimation. The outcome variables were the participation in blood pressure and cholesterol level checks by individuals in a given year. The balanced panel sample of 21,138 observations was constructed from 1,626 individuals from the British Household Panel Survey (BHPS) between 1996 and 2008. The analysis showed the significance of past screening behaviour for both cardiovascular screening examinations. For both cardiovascular screening examinations state dependence exist. The study also shows a significant spillover effect of the cholesterol level check on the blood pressure check and vice versa. Also a poorer health status led to a higher uptake for both types of screening examinations. Changes in recommendations have to consider the fact that taking part in one type of cardiovascular screening examination can influence the decision to take part in the other type of cardiovascular screening examination

"A convenient truth": air travel passengers' willingness to pay to offset their CO2 emissions

Several economic reviews demonstrate the substantial costs related to climate change and consequently call for early action. These reviews, however, have been limited to measuring ‘objective’ risks and expected material damage related to climate change. The ‘subjective’ perceived risk of climate change and society’s willingness to pay (WTP) to avoid these risks are expected to provide an important additional motivation for direct action. We investigate whether and why air travel passengers—an increasingly important source of greenhouse gas emissions—are supportive of measures that increase the cost of their travel based on the polluter pays principle and compensate the damage caused by their flight. Compared to the results of the few previous studies that have elicited WTP estimates for climate policy more generally, our results appear to be at the lower end of the scale, while a comparison to estimates of the social cost of carbon shows that the average WTP estimate in this study is close to the estimated marginal damage cost. Although significant differences are found between travellers from Europe, North America, Asia and the rest of the world, we show that there exists a substantial demand for climate change mitigation action. The positive risk premium over and above the expected property damage cost assessments should be accounted for more explicitly in economic reviews as it will add to the burden of proof of direct action. Measurements of passenger WTP will help policy makers to design effective financial instruments aimed at discouraging climate-unfriendly travel activities as well as to generate funds for the measures directed at climate change mitigation and adaptation. Based on stated WTP by travellers to offset their greenhouse gas emissions, funds in the order of magnitude of €23 billion could be generated annually to finance climate change mitigation activities

A contingent valuation study to estimate the parental willingness-to-pay for childhood diarrhoea and gender bias among rural households in India

We used contingent valuation technique to estimate the parental willingness to pay for an episode of diarrhoea among 324 children of both sexes aged between five and seven years in two rural villages of Chennai in India. The aim was to examine if there was any gender bias in the parental willingness to treat children for a diarrhoeal episode, and if so to what extent. The willingness to pay was specified as a hedonic function of the duration and severity of an episode, and of parents' socioeconomic characteristics. The findings suggest that parents were willing to pay more to protect their male child compared to the female child suffering from a diarrhoeal episode. The median willingness to pay to avoid an episode for male and female children were calculated at Rs. 33.7 (approx. US$0.72) and Rs. 25.2 (approx. US$ 0.54) respectively – a difference of around 34%. After adjusting for the greater duration and severity of the illness, it was found that the difference between the two medians increased to 51%

Uncertain future preferences and conservation

An important problem in environmental economics arises from te irreversibility of consuming or destroying certain resources. Extractive resources like oil are a clear example. Even for environmental resources the same seems to be true in a number of environmental cases, for example biodiversity, current climate conditions, or complex ecological systems. Irreversibility imposes a sever externality across different generations; future generations will suffer from the destruction of a unique asset like Amazonia, and it is not clear how such a loss could be compensated in terms of other goods. If such an asset is destroyed, then it is not possible to subsequently restore it. In contrast, if the asset is preserved, then it is possible to "use" the asset at a subsequent date. If there is uncertainty about future preferences or valuations, then preservation provides a type of insurance which is not available if the irreversible decision is carried out