Publications

  • Matrin Karlsson with Martin Fischer, Therese Nilsson; Nina Schwarz: The Long-Term Effects of Long Terms – Compulsory Schooling Reforms in Sweden. In: Conditionally accepted, Journal of the European Economic Association (2019). doi:10.4419/86788853 Citation Details

    We evaluate the impact on earnings, pensions, and further labor market outcomes of two parallel educational reforms increasing instructional time in Swedish primary school. The reforms extended the annual term length and compulsory schooling by comparable amounts. We find striking differences in the effects of the two reforms: at 5%, the returns to the term length extension were at least half as high as OLS returns to education and benefited broad ranges of the population. The compulsory schooling extension had small (2%) albeit significant effects, which were possibly driven by an increase in post-compulsory schooling. Both reforms led to increased sorting into occupations with heavy reliance on basic skills.

  • Martin Karlsson with Norman Bannenberg; Hendrik Schmitz: The Economics of Long-Term Care. In: Oxford Encyclopedia of Economics and Finance (forthcoming) (2019). Citation Details
  • Martin Karlsson; Nicolas Ziebarth: Population health effects and health-related costs of extreme temperatures: Comprehensive evidence for Germany. In: Journal of Environmental Economics and Management (2018). doi:10.1016/j.jeem.2018.06.004 Citation Details

    This study assesses the short and medium-term impact of extreme temperatures on population health and health-related costs in Germany. For 1999 to 2008, we link the universe of 170 million hospital admissions and all 8 million deaths with weather and pollution data at the day-county level. Extreme heat significantly and immediately increases hospitalizations and deaths. This finding holds irrespective of whether we employ econometric models that are standard in economics or models that are standard in epidemiology; we compare and discuss both approaches. We find evidence for partial “harvesting.” At the end of a 30-day window, the immediate health effects are, on average, one quarter lower, but this reduction is primarily evident for cardiovascular and neoplastic diseases. Moreover, aggregating at the yearly level reduces the effect size by more than 90 percent. The health-related economic costs accumulate up to €5 million per 10 million population per hot day with maximum temperatures above 30 °C (86 °F).

  • Martin Karlsson with 27 co-authors from various countries: End-Of-Life Medical Spending in Last Twelve Months is Lower than Previously Reported. In: Health Affairs (2017). doi:10.1377/hlthaff.2017.0174 Citation Details

    Although end-of-life medical spending is often viewed as a major component of aggregate medical expenditure, accurate measures of this type of medical spending are scarce. We used detailed health care data for the period 2009–11 from Denmark, England, France, Germany, Japan, the Netherlands, Taiwan, the United States, and the Canadian province of Quebec to measure the composition and magnitude of medical spending in the three years before death. In all nine countries, medical spending at the end of life was high relative to spending at other ages. Spending during the last twelve months of life made up a modest share of aggregate spending, ranging from 8.5 percent in the United States to 11.2 percent in Taiwan, but spending in the last three calendar years of life reached 24.5 percent in Taiwan. This suggests that high aggregate medical spending is due not to last-ditch efforts to save lives but to spending on people with chronic conditions, which are associated with shorter life expectancies.

  • Martin Karlsson with Juan Pablo Atal, Hanming Fang; Nicolas Ziebarth: Exit, Voice or Loyalty? An Investigation into Mandated Portability of Front-Loaded Private Health Plans. In: Forthcoming article in Journal of Risk and Insurance (2017). doi:10.3386/w23468 Citation Details

    We study theoretically and empirically how consumers in an individual private longterm health insurance market with front-loaded contracts respond to newly mandated portability requirements of their old-age provisions. To foster competition, effective 2009, the German legislature made the portability of standardized old-age provisions mandatory. Our theoretical model predicts that the portability reform will increase internal plan switching. However, under plausible assumptions, it will not increase external insurer switching. Moreover, the portability reform will enable unhealthier enrollees to reoptimize their plans. We find confirmatory evidence for the theoretical predictions using claims panel data from a big private insurer.

  • Martin Karlsson, Sonia Bhalotra; Therese Nilsson: Infant Health and Longevity. Evidence from a Historical Trial in Sweden. In: Journal of the European Economic Association (2017). doi:10.1093/jeea/jvw028 Citation Details

    This paper investigates the potential of an infant intervention to improve life expectancy, contributing to emerging interest in the early life origins of chronic disease. We track individuals from birth to death, and are able to identify age and cause of death. The intervention was pioneered in Sweden in 1931–1933, and appears to have been pivotal in the emergence of universal infant care programmes in the Scandinavian countries during the creation of the Welfare State. It provided information and support to mothers, with an emphasis on nutrition and sanitation, while monitoring infant care through home visits and clinics. We estimate that the average duration of programme exposure in infancy led to a 1.56% point decline in the risk of infant death (24% of baseline risk) and a 2.56% point decline in the risk of dying by age 75 (7.0% of baseline risk), and these impacts are much larger for children born out of wedlock. Intervention-led declines in the risk of dying after the age of 50 are dominated by reductions in cancer and cardiovascular mortality. We find no evidence of selective utilisation, and the estimates are similar when we exploit within-mother variation in outcomes. (JEL: I15; I18; H41)

  • Martin Karlsson with Joan Costa-i-Font; Henning Øien: Careful in the Crisis? Determinants of Older People’s Informal Care Receipt in Crisis-Struck European Countries. In: Health Economics (2016) No 25(S2), p. 25-42. doi:10.1002/hec.3385 Citation Details

    Macroeconomic downturns can have an important impact on the receipt of informal and formal long-term care, because recessions increase the number of unemployed and affect net wealth. This paper investigates how the market for informal care changed during and after the Great Recession in Europe, with particular focus on the determinants of care receipt. We use data from the Survey of Health, Ageing and Retirement in Europe, which includes a rich set of variables covering waves before and after the Great Recession. We find evidence of an increase in the availability of informal care after the economic downturn when controlling for year and country fixed effects. This trend is mainly driven by changes in care provision of individuals not cohabiting with the care recipient. We also find evidence of several determinants of informal care receipt changing during the crisis – such as physical needs, personal wealth, and household structures. Copyright © 2016 John Wiley & Sons, Ltd.

  • Martin Karlsson; Daniel Avdic: Growth in Earnings and Health: Nothing is as Practical as a Good Theory. In: Review of Income and Wealth (2016). doi:10.1111/roiw.12243 Citation Details

    We discuss some issues associated with the empirical analysis of the relationship between socioeconomic status and health. We point out that, in addition to elaborate empirical modeling and good data, a conceptual framework is helpful both for making sense of one's own results and for the purpose of reconciling results across studies. We find that when we align the empirical specification with the Grossman model, a negative effect of income on health emerges. Even though this unexpected finding can be rationalized, we think that some caution regarding standard dynamic panel data techniques is warranted in this context.

  • Martin Karlsson, Tobias Klein; Nicolas Ziebarth: Skewed, Persistent and High before Death: Medical Spending in Germany. In: Fiscal Studies 37:3-4 (2016), p. 527-559. doi:10.1111/j.1475-5890.2016.12108 Citation Details

    We use claims panel data from a big German private health insurer to provide detailed individual-level evidence on medical spending between 2005 and 2011. This includes evidence on the distribution of medical spending, the dependence of medical spending on age and other demographic characteristics, its persistence, and how medical spending evolves in the years before death. Our main findings are that health care spending more than doubles between ages 50 and 80 and that spending is very concentrated: the top 10 per cent of all spenders are responsible for 53 per cent of all medical spending in a given year. There is a 50 per cent probability that individual expenditures lie in the same quintile of the distribution after five years, for both very-high- and very-low-cost individuals. Medical spending in the year of death is six times higher for the deceased than for everybody else in that year and accounts for 7.9 per cent of lifetime spending. Females use more office-based care and have higher spending at younger ages, whereas males have higher spending at older ages, particularly for hospital care, and die younger. The presentation of these empirical facts is framed by an institutional discussion of the German health care system, a comparison between publicly- and privately-insured individuals, and a discussion of medical spending trends in aggregate-level data.

  • Martin Karlsson; Stefan Pichler: Demographic Consequences of HIV. In: Journal of Population Economics, Vol 28 (2015) No 4, p. 1097-1135. doi:10.1007/s00148-015-0547-y Citation Details

    In this study, we estimate the effect of the HIV epidemic on demographic outcomes in three countries in Sub-Saharan Africa. We apply the synthetic control group method and estimate the consequences for life expectancy, mortality, and birth rates. According to standard measures of fit, the method seems to perform well for all countries and outcomes. Our results show a large effect on life expectancy and mortality in two countries, and a small and insignificant effect on birth rates. The impact of the pandemic is very heterogeneous. In Mozambique, the impact of HIV on life expectancy and mortality appears to have been surprisingly small. This heterogeneity is not due to AIDS causing fewer deaths in Mozambique than in the two other countries. Instead, the net effect of HIV in Mozambique appears to be diminished by reduced mortality for other causes—in particular child mortality, respiratory infections, and injuries.

  • Martin Karlsson, Therese Nilsson; Stefan Pichler: The Impact of the 1918 Spanish Flu Epidemic on Economic Performance in Sweden. In: Journal of Health Economics, Vol 36 (2014), p. 1-19. doi:10.1016/j.jhealeco.2014.03.005 Citation Details

    We study the impact of the 1918 influenza pandemic on short- and medium-term economic performance in Sweden. The pandemic was one of the severest and deadliest pandemics in human history, but it has hitherto received only scant attention in the economic literature – despite representing an unparalleled labour supply shock. In this paper, we exploit seemingly exogenous variation in incidence rates between Swedish regions to estimate the impact of the pandemic. The pandemic led to a significant increase in poorhouse rates. There is also evidence that capital returns were negatively affected by the pandemic. However, contrary to predictions, we find no discernible effect on earnings.

  • Martin Karlsson; Nicolas Ziebarth: The Effects of Expanding the Generosity of the Statutory Sickness Insurance System. In: Journal of Applied Econometrics, Vol 2014 (2014) No 29(2), p. 208-230. doi:10.1002/jae.2317 Citation Details

    In 1999, in Germany, the statutory sick pay level was increased from 80 to 100 percent of foregone earnings for sickness episodes of up to six weeks. We show that this reform has led to an increase in average absence days of about 10 percent or one additional day per employee, per year. The estimates are based on SOEP survey data and parametric, nonparametric, and combined matching-regression difference-in-differences methods. Extended calculations suggest that the reform might have increased labor costs by about e 1.8 billion per year and might have led to the loss of around 50,000 jobs.

  • Martin Karlsson; Florian Klohn: Testing the Red Herring Hypothesis on an Aggregated Level: Ageing, Time-to-Death and Care Costs for Older People in Sweden. In: The European Journal of Health Economics, Vol 2014 (2013) No 15, p. 533-551. doi:10.1007/s10198-013-0493-0 Citation Details

    In this paper we test the ‘red herring’ hypothesis for expenditures on long-term care (LTC). The main contribution of this paper is to assess the ‘red herring’ hypothesis by using the probability of dying as a measure for time-to-death (TTD). In addition, we implement models that allow for age-specific TTD effects on LTC utilization as well as sex-specific effects. We also focus on total, institutional and domiciliary LTC separately. For our analysis we use high quality administrative data from Sweden. Our analysis is based on fixed effects estimates. We use our findings to project future LTC expenditures and show that, although TTD is a relevant predictor, age itself remains the main driver of LTC expenditures.

  • Henning Øien, Martin Karlsson; Tor Iversen: The Impact of Financial Incentives on the Composition of Long-term Care in Norway. In: Applied Economic Perspectives and Policy, Vol 34 (2012) No 2, p. 258-274. doi:10.1093/aepp/pps021 Citation Details

    In Norway, municipalities have economic incentives for choosing residential care in nursing homes for high-income clients and home-based care for low-income clients. Using a three-year panel, 2007-2009, on 427 municipalities we provide an analysis of the effect of the Norwegian long-term care (LTC) financing system on the composition of LTC services at the municipality level. Our main result is that the composition of service is determined by local government revenue and local need for LTC services. We cannot identify an effect of average income among older people in a municipality regarding the balance between home-based care and nursing home care. Hence, the results do not provide evidence of a service distortion.

  • Martin Karlsson, Henning Øien; Tor Iversen: Scandinavian Long-Term Care Financing. In: Joan Costa-Font; Christophe Courbage (Ed.): Financing Long-Term Care in Europe. Institutions, Markets and Models.. Palgrave Macmillan, 2012, p. 254-278. doi:10.1057/9780230349193_14 Citation Details

    The Scandinavian countries — Denmark, Norway and Sweden — share a common history and common political traditions, which has led to very similar systems for social care being introduced in the three countries. This applies to the division of roles and responsibilities between different public bodies, as well as for the national policy objectives that have been laid down in various pieces of legislation. Thus, all three countries pursue the general goal of providing local care services free of charge to everyone in need, independently of their financial circumstances.

  • Martin Karlsson; Florian Klohn: Ageing, Health and Disability: An Economic Perspective. In: Sven Kunisch, Stephan Boehm; Michael Boppel (Ed.): From Grey to Silver. Managing the Demographic Change Successfully. . Springer, 2011, p. 51-67. doi:10.1007/978-3-642-15594-9 Citation Details
  • Martin Karlsson; Nicolas Ziebarth: A Natural Experiment on Sick Pay Cuts, Sickness Absence, and Labor Costs. In: Journal of Public Economics , Vol 94 (2010) No 11-12, p. 1108-1122. doi:10.1016/j.jpubeco.2010.09.001 Citation Details

    This study estimates the reform effects of a reduction in statutory sick pay levels on sickness absence behavior and labor costs. German federal law reduced the legal obligation of German employers to provide 100% continued wage pay for up to six weeks per sickness episode. In 1996 statutory sick pay was decreased to 80% of foregone gross wages. Within the reform's target group – private sector employees – this measure increased the proportion of employees having zero days of absence between 6 and 8%. Quantile regression estimates indicate that employees with up to 5.5 annual absence days reduced their days of absence by about 12%. Extended analyses suggest that in industries that enforced the cut, behavioral effects were about twice as large. We show that the direct labor cost savings effect stemming from the cut in replacement levels clearly exceeds the indirect effect due to the decrease in absenteeism. Our calculations about the total decrease in labor costs are very much in line with official data which suggest that total employer-provided sick pay decreased by 6.7% or €1.7 billion per year.

  • Les Mayhew, Martin Karlsson; Ben Rickayzen: The Role of Private Finance in Paying for Long Term Care. In: The Economic Journal, Vol 120 (2010) No 548, p. 478-504. doi:10.1111/j.1468-0297.2010.02388.x Citation Details

    An ageing population and increased longevity means that long term care will become progressively more expensive. In 2009 the Government published a Green Paper on future funding options and a White Paper in 2010. This article considers the role of private finance products under the ‘Partnership’ option. It finds that few households are able to pay for LTC based on income and savings but the number increases if housing assets are included. We show that products can be devised for a range of circumstances, although state support would need to continue. We propose a simplified means testing system based on a combination of income and assets.

  • Martin Karlsson, Therese Nilsson, Carl Hampus Lyttkens; George Leeson: Income Inequality and Health: Importance of a Cross-Country Perspective. In: Social Science and Medicine , Vol 70 (2010) No 6, p. 875-885. doi:10.1016/j.socscimed.2009.10.056 Citation Details

    This paper uses a unique dataset-containing information collected in 2006 on individuals aged 40–79 in 21 countries throughout the world to examine whether individual income, relative income in a reference group, and income inequality are related to health status across middle/low and high-income countries. The dependent variable is self-assessed health (SAH), and as a robustness check, activities of daily living (ADL) are considered. The focus is particularly on assumptions regarding an individual's reference group and on how the estimated relationships depend on the level of economic development. Correcting for national differences in health reporting behavior, individual absolute income is found to be positively related to individual health. Furthermore, in the high-income sample, there is strong evidence that average income within a peer-age group is negatively related to health, thus supporting the relative income hypothesis. In middle/low-income countries, it is instead average regional income that is negatively associated with health. Finally, there is evidence of a negative relationship between income inequality and individual health in high-income countries. Overall, the results suggest that there might be important differences in these relationships between high-income and middle/low-income countries.

  • Andreas Bergh; Martin Karlsson: Government Size and Growth: Accounting for Economic Freedom and Globalization. In: Public Choice, Vol 142 (2009) No 1, p. 195-213. doi:10.1007/s11127-009-9484-1 Citation Details

    We examine the relationship between government size and economic growth, controlling for economic freedom and globalization, and using Bayesian Averaging over Classical Estimates in a panel of rich countries.

    Countries with big government have experienced above average increases in the KOF globalization index and in the Fraser institute’s Economic freedom index. To maintain comparability with earlier studies, we use two sample periods: 1970–1995 and 1970–2005. Government size robustly correlates negatively with growth. We also find some evidence that countries with big government can use economic openness and sound economic policies to mitigate negative effects of big government.

  • Jaap Spreeuw; Martin Karlsson: Time Deductibles as Screening Devices: Competitive Markets. In: The Journal of Risk and Insurance , Vol 76 (2009) No 2, p. 261-278. doi:10.1111/j.1539-6975.2009.01298.x Citation Details

    Seminal papers on asymmetric information in competitive insurance markets, analyzing the monetary deductible as a screening device, show that any existing equilibrium is of a separating type. High risks buy complete insurance, whereas low risks buy partial insurance—and this result holds for the Nash behavior as well as for the Wilson foresight. In this article, we analyze the strength of screening based on limitations to the period of coverage of the contract. We show that in this case (1) the Nash equilibrium may entail low risks not purchasing any insurance at all, and (2) under the Wilson foresight, a pooling equilibrium may exist.

  • Martin Karlsson, Les Mayhew; Ben Rickayzen: Individualised Life Tables: Investigating Dynamics of Health, Work and Cohabitation in the UK. In: The Journal of Population Ageing , Vol 1 (2009) No 2, p. 153-191. doi:10.1007/s12062-009-9008-2 Citation Details

    A life table is a table which shows, at each age, the probability that a person in a given population will die before their next birthday. It can be used to calculate life expectancy and healthy life expectancy for people of different ages. In this work, using longitudinal datasets and panel data methods, we produce life tables for different subgroups of the population, defined according to cohabitation status, employment and other factors. As a first step, we estimate the dynamics of factors which are of particular importance in people’s lives: health, labour market participation, cohabitation and mortality. The significance of these variables is twofold: they determine the well-being of individuals, but the variables also determine the resources available to the individuals in times of ill health. Using the British Household Panel Survey, we analyse the extent to which these variables are influenced by one another, and by exogenous factors such as education and ethnicity. Estimating a system of probit models using simulation techniques, we are able to distinguish the effects of the exogenous and endogenous variables from state dependence and unobserved heterogeneity. We also correct for attrition and the initial conditions problem. We estimate time trends in mortality, health and other dependent variables to investigate whether a compression of morbidity has occurred in the recent past. Finally, the parameter estimates are used to simulate life tables for various sub-groups in the population and compare measures of life expectancy and healthy life expectancy for different groups.

  • Martin Karlsson, Les Mayhew; Ben Rickayzen: In Sickness and in Health? Dynamics of Health, Cohabitation in United Kingdom. In: Sandra Dawson; Zoë Slote Morris (Ed.): Future Public Health: Burdens, Challenges and Opportunities. Palgrave Macmillan, 2008, p. 155-173. Citation Details

    The purpose of this paper is to analyse the dynamics of cohabitation and functional impairments among older people. Our research has three main aims. Firstly, we want to analyse the effects of cohabitation on disability. Secondly, we want to study time trends in disability and cohabitation jointly to explore relationships between the two. Thirdly, we examine socioeconomic differences -- as captured by educational attainment -- in disability.

    These issues are of great interest from several points of view. Firstly, they address an emerging theoretical debate concerning the effects of cohabitation on health and contribute to a sparse empirical literature on the topic. Secondly, our findings are highly policy relevant. Concerning long-term care for older people, for example, cohabitation is of double importance: firstly, since people who cohabit tend to be healthier, and secondly, since a partner is the typical provider of informal care. In a time where family structures among the old are likely to change (due to changes in life expectancy and divorce rates), our research will be useful for planning purposes. Finally, the model can be used to simulate populations of certain characteristics. Hence, it can be used to derive insurance premiums in order to reduce the problem of selection effects in the market for long-term care insurance.

    Using the British Household Panel Survey dataset, we apply panel data and simulation techniques to exploit the longitudinal characteristic of the panel. We estimate the two dependent variables -- cohabitation status and disability -- jointly, and allow for time trends, age effects and unobserved heterogeneity.

    We find that there are systematic differences between single and cohabiting people so that a cross sectional analysis would overestimate the causal relationship; nevertheless, cohabitation has a strong and positive effect on health. Furthermore, we find that bereavement of a partner has a significant negative impact on health.

  • Martin Karlsson: Quality Incentives for General Practitioners in a Regulated Market. In: Journal of Health Economics, Vol 26 (2007) No 4, p. 699-720. doi:10.1016/j.jhealeco.2006.12.001 Citation Details

    This paper analyses whether GPs in a capitation system have incentives to provide quality even though health is a credence good. A model is developed where the quality of the service varies due to inherent differences between the GPs and rational patients make choices based on the outcome of treamtent.

    We find that it is difficult to provide appropriate incentives since the search activity of patients offsets direct effects of a change in reimbursement. Variation in the inherent ability of the GPs is good since it increases the search activity of the patients and the optimal reimbursement scheme is inversely proportional to the dispersion in types. Finally, we find that offering a menu of contracts can potentially increase social welfare above the level of a simple capitation regime, but it tends to lead to a higher variation in quality levels.

  • Martin Karlsson, Les Mayhew; Ben Rickayzen: Long Term Care Financing in 4 OECD Countries: Fiscal Burden and Distributive Effects. In: Health Policy , Vol 80 (2007) No 1, p. 107-134. doi:10.1016/j.healthpol.2006.02.002 Citation Details

    This paper compares long term care (LTC) systems in four OECD countries (UK, Japan, Sweden and Germany). In the UK, provision is means tested, so that out of pocket payments depend on levels of income, savings and assets. In Sweden, where the system is wholly tax-financed, provision is essentially free at the point of use. In Germany and Japan, provision is financed from recently introduced compulsory insurance schemes, although the details of how each scheme operates and the distributive consequences differ somewhat. The paper analyses the effects of importing the other three countries’ systems for financing LTC into the UK, focussing on both the distributive consequences and the tax burden. It finds that the German system would not be an improvement on the current UK system, because it uses a regressive method of financing. Therefore, the discussion of possible alternatives to the present UK system could be restricted to a general tax-based system as used in Sweden or the compulsory insurance system as used in Japan. The results suggest that all three systems would imply increased taxes in the UK.

  • Martin Karlsson, Les Mayhew, Ben Rickayzen; Robert Plumb: Future Costs for Long-Term Care: Cost Projections for Long-Term Care for older People in the United Kingdom.. In: Health Policy , Vol 75 (2006) No 2, p. 187-213. doi:10.1016/j.healthpol.2005.03.006 Citation Details

    The purpose of this paper is to analyse the future sustainability of the UK system for provision of long-term care (LTC) due to changes in demography and health status among the older people. It considers how demand for LTC will evolve and to what extent there will be sufficient supply to meet demand. For formal care, this requires an estimate of how much the public purses, and hence taxpayers, will be burdened with LTC costs. For informal care, it involves estimating whether there will be enough carers if current patterns of provision were to continue. The results show that demand for long-term care will start to take off 10 years from now, and reach a peak somewhere after 2040. The research finds that the most significant increase will be in demand for informal care, where the number of recipients are projected to increase from 2.2 million today to 3.0 million in 2050. Relative increases will be similar in all care settings, amounting to between 30 and 50% compared with the levels today; however, the most noticeable increase will be in demand for formal home care, which is projected to be 60% above current levels by 2040. Total expenditure on formal long-term care will increase from £ 11 billion per year today to approximately £ 15 billion per year by 2040 (in 2001 prices). Expressed in taxation terms the effective contribution rate will increase from around 1.0% of total wages today to 1.3% in 2050. Availability of informal carers is potentially a big problem, but the extent of the problem is very sensitive to the assumptions made concerning health improvements and care-giving patterns.

  • Martin Karlsson, Tor Iversen; Henning Øien: Ageing and Health Care Costs. In: Forthcoming article in Oxford Encyclopedia of Economics and Finance. doi:10.1093/acrefore/9780190625979.013.24 Citation Details

    There has been a rise in recent research regarding the economics on the consequences of population ageing for health care expenditure. The focus of this research is on expenditures in the last years of life and the implications for the age profile of health care spending. One open issue in the literature is whether health care expenditure is so concentrated in the last years before death that the age profiles in spending will change when longevity increases. The previous literature also finds that the age profile of health expenditures, after controlling for time to death, is dependent on the type of health care expenditure that is being predicted. Some studies find that the age is more powerful in predicting long-term care compared to health care expenditures. However, this result appears to depend on the empirical model used.

    There are conflicting findings that can be reconciled by carefully reviewing and validating the methods that have been used in the literature. In particular, there are advantages of using a two-part model for health care expenditure, in which health care utilization is allowed to have different determinants on the extensive and the intensive margin. This can be seen when this standard modeling approach is compared to alternatives that require weaker assumptions at the cost of possibly inferior fit to the data. Different proxies are evaluated for morbidity affect the estimated end-of-life costs and age profiles in spending. Using a high-quality health insurance dataset from Germany, which includes all relevant determinants of health and long-term care expenditure, the accuracy of popular methods in predictions of future health and long-term care spending are assessed. The basis for this validation exercise is the prediction accuracy within the same dataset. The endogeneity of death is an issue that has not been addressed satisfactorily in the literature, and there is a solution to the problem based on standard approaches to causal inference.

  • Martin Karlsson, Florian Klohn; Ben Rickayzen: The Role of Heterogeneous Parameters for the Detection of Selection in Insurance Contracts. In: Forthcoming article in Insurance Mathematics and Economics . Citation Details