The political use of the term “moral hazard”: evidence from policymakers of the Eurozone. Bruges Political Research Papers 78/November/2019

Since the global financial crisis of 2007-8, the need for increased risk sharing between the members of the euro area has been acknowledged. However, the evolution towards an “insurance union” has been hampered by the political division between risk sharing and risk reduction. This paper intends to contribute to the explanation of this political deadlock by exploring the main explicit argument underpinning this division, that is to say moral hazard. Unlike most of the academic research on moral hazard, which takes the concept for granted, this paper explores moral hazard from an ideational point of view. The purpose of this research is to question the neutrality of the argument of moral hazard. Using discourse analysis techniques, the empirical study provides information on how and why policymakers of the Eurozone use the term “moral hazard”. This study argues that contrary to appearances, moral hazard is not a de-politicised concept. The author found evidence that the conception of moral hazard is shaped by strategic interests and/or prevailing set of ideas that explain divergent preferences towards risk sharing

Better Safe than Sorry? Ex Ante and Ex Post Moral Hazard in Dynamic Insurance Data

This paper empirically analyzes moral hazard in car insurance using a dynamic theory of an insuree's dynamic risk (ex ante moral hazard) and claim (ex post moral hazard) choices and Dutch longitudinal micro data. We use the theory to characterize the heterogeneous dynamic changes in incentives to avoid claims that are generated by the Dutch experience-rating scheme, and their effects on claim times and sizes under moral hazard. We develop tests that exploit these structural implications of moral hazard and experience rating. Unlike much of the earlier literature, we find evidence of moral hazard.insurance;moral hazard;selection;state dependence;event-history analysis

A Model of Income Insurance and Social Norms

A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint” can make the individual abstain from fraud (“mimicking”). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willingness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.moral hazard, sick pay insurance, labor supply, asymmetric information

A Model of Income Insurance and Social Norms

A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint” can make the individual abstain from fraud (“mimicking”). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willing­ness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.Moral Hazard; Sick Pay Insurance; Labor Supply; Asymmetric Information  

Testing Creditor Moral Hazard in Sovereign Bond Markets: A Unified Theoretical Approach and Empirical Evidence

This paper critically evaluates the existing empirical literature on creditor moral hazard in sovereign bond markets, proposes a unified theoretical approach to test for IMF-induced creditor moral hazard, and provides empirical evidence, using daily sovereign bond market spreads of Indonesia and Korea. The results suggest that IMF-related news regarding program negotiations and approval may be associated with creditor moral hazard, but their impact on spreads is short-lived, indicating that creditor moral hazard could be best described as a short-run phenomenon.Creditor moral hazard, financial markets, the IMF, and news

Moral hazard in a voluntary deposit insurance system: Revisited

This paper extends Wheelock and Kumbhakar’s (1995) test for moral hazard in the Kansas deposit insurance system (1910-1920). This paper tests and finds evidence of omitted bank-specific effects. Estimates in Wheelock and Kumbhakar (1995), as a result, are biased. This paper introduces unobserved individual heterogeneity to the test for moral hazard, corrects their estimates, and finds more evidence of moral hazard in the Kansas deposit insurance system

A Model of Income Insurance and Social Norms

A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint†can make the individual abstain from fraud (“mimickingâ€). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willingness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.Moral hazard; sick pay insurance; labor supply; asymmetric information

De-mystifying the Inconvenient Truth : Does Ex Post Moral Hazard Indeed Exist in Korean Private Health Insurance Market?

There have been heated debates on whether private health insurance creates moral hazard effects. Despite its importance, however, the moral hazard problem of private health insurance is still controversial and understudied. To empirically examine whether or not moral hazard exists in the Korean private health insurance market, we employed two-stage regression for endogeneity control and the Heckman two-step procedure for sample selection bias control, which are expected to produce consistent estimates. All estimation results do not allow us to detect the presence of the moral hazard effects and imply that people hold private health insurance simply as “safety net”.Private Health Insurance, Moral Hazard, Endogeneity, Sample Selection Bias

Traceability, Moral Hazard, and Food Safety

Errors in traceability can significantly impact the moral hazard associated with producing safe food. The effect of moral hazard depends on the proportion of unsafe food costs that can be allocated to the responsible producer, which depends on the efficiency of the traceability system. In this paper, we develop a model that identifies the minimum level of traceability needed to mitigate moral hazard and motivate suppliers to produce safe food. Regulators and consumer can use the results of this research to design regulations and contracts that mitigate moral hazard and motivate producers to deliver safe food.Food safety, traceability, moral hazard, Food Consumption/Nutrition/Food Safety,