This paper studies the impact of social insurance on individual choices and welfare in a dynamic general equilibrium model with uncertain medical expenses and individual health insurance choices. I find that social insurance (modeled as the combination of a minimum consumption floor and the Medicaid program) does not only distort saving and labor supply decisions, but also has a large crowding out effect on the demand for private health insurance. However, despite the distorting effects, the net welfare consequence of eliminating social insurance is still negative in most cases. In addition, the large crowding out effect on private health insurance suggests that the existence of social insurance programs may be one reason why some Americans do not buy any health insurance.

Introduction

Means-tested welfare programs in the United States, such as Medicaid, TANF and SNAP, provide American households with a social “safety net” that guarantees a minimum consumption floor and provides public health insurance for the poor.1 Total spending on these programs is large and it has been the fastest growing component of US government spending over the past few decades. Making up only 1.2% of GDP in 1964, by 2004 it had grown to approximately 5% of GDP, more than the cost of any other single public program (e.g., Social Security, Medicare). Meanwhile, policy makers have often proposed to reform the means-tested programs.2 Despite this, there are relatively few studies that quantitatively evaluate the impact of means-tested social insurance on individual choices and welfare, compared to the large literature that uses dynamic life-cycle models to quantitatively examine other public programs such as Social Security.3 This paper attempts to fill this gap in the literature. Does the US social insurance system improve individual welfare? Conventional wisdom says that social insurance can improve individual welfare because it insures poor households against large negative shocks. However, some economists have argued that the social insurance programs may discourage work and thus reduce labor supply (e.g. Moffitt, 2002), and other economists find that social insurance discourage private saving and thus reduce capital accumulation (Hubbard, Skinner, and Zeldes, 1995). Furthermore, some recent empirical studies suggest that the social insurance programs may have crowded out the demand for private insurance.4 Therefore, the net welfare consequence of social insurance depends on the relative importance of the above-described mechanisms. In this paper, I develop a dynamic general equilibrium model with heterogenous agents and incomplete markets to formalize all these relevant mechanisms and study the net welfare consequence of social insurance. Different from standard incomplete markets models, which usually do not model health insurance or assume exogenous health insurance coverage, I endog enize the individual choices of health insurance coverage. As a result, the model can capture the crowding out effect of social insurance on the demand for private health insurance. In the model, agents face medical expense shocks, labor income shocks, and survival risks over the life cycle. In each period, agents endogenously determine their labor supply, and decide whether to take up employer-sponsored health insurance if it is offered and whether to purchase individual health insurance from the private market. Different from some earlier studies on social insurance (such as Hubbard et al., 1995), I separate Medicaid from other social insurance programs in the model, that is, the social insurance system is modeled as a combination of a minimum consumption floor and a means-tested public health insurance program (like the US Medicaid program).5 This modelling choice is motivated by the fact that after the 1996 welfare reform, the Medicaid program was separated from the other major means-tested programs such as TANF/AFDC, and was allowed to impose different eligibility criteria. In addition, the model includes a pay-as-you-go Social Security program and a Medicare program.

Abstract

This study examines the association between cooperative social and environmental disclosure (CSED) and financial performance of deposit-taking savings and credit cooperatives (SACCOs) in Kenya. Using data comprising of 1272 observations for 212 deposit-taking SACCOs in Kenya over the period 2008–2013, panel OLS analyses are performed to establish the association between SACCOs’ CSED levels and financial performance. The results reveal a relatively low level of CSED by deposit-taking SACCOs in Kenya at 29.3%. As a departure from findings in mainstream studies, the study reveals a negative association between CSED and financial performance. We argue that the negative association could be due to changed regulatory landscape or a signal that Kenyan SACCOs are transitioning to financially (profit) oriented goals. The results are useful to regulators and policy makers in designing an optimal disclosure policy for SACCOs.

Introduction

There has been increased disclosure of corporate social engagement by organizations in many developed economies in the last 15 years (Bebbington, Larrinaga, & Moneya, 2008; Branco & Rodrigues, 2006, 2008; Islam, 2010; Kent & Zunker, 2013; Luethge & Han, 2012; Maali, Casson, & Napier, 2006; Magness, 2006; McGrath, 2008; Menassa, 2010; Najah & Jarboui, 2013). However, limited studies on social and environmental disclosure exist in developing economies (Abdul Hamid, 2004; Barako & Brown, 2008; Ghazali, 2007; Guidara, Khlif, & Souissi, 2015; Ibrahim & Hanefah, 2014). Social and environmental disclosures include disclosures regarding an organization and its physical and social environment (Gray, Owen, & Adams, 2009; Guidara et al., 2015; Luethge & Han, 2012). They are largely voluntary and include disclosures that focus on community, environment, employees, customers and products (Barako & Brown, 2008; Guidara et al., 2015; Ibrahim & Hanefah, 2014; Kent & Zunker, 2013; Luethge & Han, 2012; McGrath, 2008; Menassa, 2010).

1. Introduction

2. Brief Literature Review

3. Methodology of the Study

4. Estimation Methodology

5. Empirical Results and Analysis

6. Conclusion

References

The article investigates the relationship between the energy consumption, gross domestic savings and gross domestic income of G7 countries by using the time series data from 1970-2012. The study employs the recently developed ARDL- bounds testing approach. The article finds there is strong evidence that growth rate of income, gross domestic savings play a stronger role in determining the short run and long run behavior of energy consumption per capita in G7 countries. The empirical results suggested that in most of the countries the relationship of consumption per capita and gross domestic income is positive, that means when the income rises the consumption will also rise but not necessarily at the same rate, which is in accordance with theory of Keynes of marginal propensity to consume, confirming the absolute income hypothesis. On the other hand the gross domestic savings has a negative relationship with the energy consumption per capita which confirms the same relationship of consumption as the function of difference of income and savings in long run. The Parameters of error correction terms in USA and France are -0.4283 and -0.6190 represents the speed of adjustment is very high and it would return back to the equilibrium level very quickly. While countries like Canada, Germany, and Great Britain are having the parameters of the error correction term as -0.0794, -0.2205, and -0.0867 suggests speed of adjustments is fairly very small and would take time to return to its equilibrium position. While the error correction coefficient in case of Japan is equal to -1.0183, and also statistically significant showing that convergence is more elastic. The study suggests that although Japan, Italy, USA, France are more industrially advanced countries as production is mostly based on industries. The income generated on the basis of the energy consumption in their industries may be used as forced savings to further boost the economy that will definitely affects their growth performance positively in the long run. The reliability and validity of the estimations results are confirmed by the diagnostics tests.

Introduction

The savings and income play a vital role in the development of any economy. The industrialized nations are predominantly depending on the income and savings. The economic theories have more emphasized the role of savings and investment in the economy that economic growth heavily depends on saving and investment. HarrodDomar growth model emphasized the role of economic growth of a country mostly depends on incremental capitaloutput ratio, savings rates or and investment. The higher saving rates in any country implies positive economic growth and thus raising per capita income. The empirical evidences from the literature strongly support the rate of savings to achieve a higher level of per capita income. The industrialized nations mostly emphasized on saving and reinvestment which improves the per capita income and thus improving the standard of living. Most of the studies have been conducted in the past about the saving rates and economic growth. It is argued in the literature that the country’s whose economy is developing, at the same time the rate of savings is also increased. Thus it was observed that savings and economic growth are strongly correlated. They further argued that the rapid economic developing countries have a positive impact on economic growth and thus contributing to the rise per capita income. But on the other hand the countries whose savings rate is very low results in steady development. The rest of the article is organized as follows. Section 2 highlights brief literature review. Section 3 elucidates the data and model specification. Section 4 explains econometric methodology. Section 5 outlines the empirical results. Finally section 6 concludes.

1. Introduction

2. Literature Review

3. Data Analysis and Empirical Results Data Analysis and Empirical Results

4. Conclusion and Recommendations

References

In recent years, there have been many discussions about savings and growth especially for developing countries. The saving concept has an important and crucial place in all economies. Indeed, the importance of savings leads to the discussion of determinants of savings in the literature. Moreover, with an awareness of the determinants of savings, the government have to put effort for increasing savings with using policies and precautions on their institutions. In this point, raising the savings of a household, which is an important element of economic life, has gained an crucial role. However, it is clear that all factors which have impacts on it should be known to solve this issue. Narrowing into transition economies, which transited from a planned economic system to market economy, the structure of savings has changed from public funds to private savings. It is clear that saving habits cannot change or adapt in the short term, in fact this paper aims to put forward recommendations to policymakers in transition economies. In this paper, it has been investigated how demographic determinants are effective on saving ratios using panel data analysis between 1993 and 2013 on 20 transition economies. The chosen demographic and economic variables are dependency ratio (total, youth and old), GDP per capita growth, population density, urban population of percentage of total population, female participation of labour force, unemployment rate.

Introduction

Savings accumulation and economic impacts of individual savings behaviours are two of the most fundamental concepts in economics, as discussed throughout economic history. The schools shaping the economic thought have tried to add different interpretations of these concepts by drawing from different points. Classical economic thought states that savings, as the source in capital accumulation and in growth models, are among the reasons for either growth or the recession. In contrast, the neo-classical model focuses on investments in directly supporting the effect of the savings and the savings are still placed as the source of growth. In this context, the differential point of Keynesian economics from Classical school can be defined as the paradox of savings, which is defined such that an increase in individual savings has individual benefits whereas in contrast an increase in national savings can cause a leak in the economy. Contrary to Keynes, Nurkse (1966) evaluated the results of the lack of savings, which means the fate for poor countries is a lack of savings in the least developed countries creates a vicious circle of poverty. According to Nurkse, low income level causes inadequate savings; relatedly this brings low-investments, which then turns to failure of production, employment, income and savings (Nurkse, 1966). The studies based on individuals’ savings are placed in the literature under the consumption theories. One of the first studies on this subject belongs to Irving Fisher (1930). Fisher, in his study, revealed that savings identified with the resolution of the two-term intertemporal optimization problems for the consumer who lived two periods including present and future (Fisher, 1930). Fisher expressed current savings as giving up present consumption and current debt as an abandonment of future consumption.

1. Introduction

2. Literature review

3. Research methodology and data

4. Research results

5. Conclusions

Acknowledgement

References

What is the households’ saving behavior during different stages of economic cycle? What is the reaction of households’ to the external shocks? Which factors motivate households’ to save in foreign currency rather than in national currency? Are households’ saving decisions rational and based on fundamentals economic indicators or, in contrary, irrational and resulted by ‘herding’ behavior? While these research questions are important for various reasons they are investigated in this empirical study. The objective of this study – to identify the economic and psychological factors influencing the households’ saving behavior. The research methods: the systemic, logical and comparative analysis of the scientific literature and panel regression. The results of this empirical study show that the households’ saving behavior is more irrational especially during economic downturn and financial crisis periods. These empirical findings can be explained by low degree of financial literacy, ineffective communication strategy of the central banks and governments during financial turmoil and economic downturn periods, etc.

Introduction

National savings are determined by the behavior of governments, firms and households which may be influenced in different ways by changing socio-economic and demographic factors. The main sector of a national economy that saves is the household sector which savings behavior has been studied most extensively. Households’ saving behavior is determined by a complex of economic, demographic, social, and cultural factors. Economists (Fidrmuc et al., 2013; Crespo Cuaresma et al., 2014 etc.) have only recently begun to study the households’ saving behavior from behavioral economics perspective while most of empirical studies focus on the socio-economic and demographic determinants of individual’s saving behavior. Investigation of psychological and economic factors of households’ saving behavior is important for various reasons. Savings are of interest to economists and psychologists because of savings’ importance to both the economy and the individual. The importance of savings to the economy lies in a multiplicity of purposes of savings and influence on two fundamentals of the economy – growth and distribution. Households can use their savings as insurance or a protection means against unanticipated changes in economic circumstances as well as a means for redistribution of economic resources over the lifecycle. Materials goods in a form of savings can be easily transferred from one generation to the next. Savings are used to finance domestic and foreign investment, thereby contributing to economic growth. The households’ saving behavior is also important for financial institutions and monetary authorities. Schlueter et al. (2015) argue that “banks face a ‘behavioralization’ of their balance sheets since deposit funding increasingly consists of non-maturing deposits with uncertain cash flows exposing them to asset liability risk”.

In a perfect capital market, firms do not need to reserve cash because they can raise external capital when required. Due to market frictions including information asymmetry and moral hazard, however, raising external capital from the spot market is costly (Jensen & Meckling, 1976; Myers & Majluf, 1984). This creates a ‘‘precautionary savings motive’’ to hoard cash as a safeguard against future cash flow shortfalls (Holmstrom & Tirole, 1998; Keynes, 1936). In addition, self-interested managers have incentives to hoard excess cash for private benefits (Dittmar, Mahrt-Smith, & Servaes, 2003). A fundamental objective of financial reporting is to reduce information asymmetry and facilitate the monitoring of the management. However, little empirical research investigates how financial reporting quality affects a firm’s cash policy. Thus, this study examines the change in corporate cash holdings after accounting restatements. On one hand, perceived information asymmetry between managers and outside investors increases after a restatement can decrease financial reporting credibility (Chen, Cheng, & Lo, 2014). Thus, raising future external financing from the spot market becomes more costly, and the value of cash reserves as insurance against future cash shortfalls is magnified. This suggests that firms should reserve more cash after restatements. On the other hand, because restatements provide an adverse signal to market participants, managers are likely to be subjected to more intensive market scrutiny. In addition, internal and external governance mechanisms are strengthened after restatement announcements (e.g., Cheng & Farber, 2008; Farber, 2005). Consequently, managers may reduce cash holdings because the private benefits of holding excess cash are lower. Thus, accounting restatements result in conflicting incentives with regard to corporate cash holdings, and the combined effect is ultimately an empirical question. To test the effect of accounting restatements on corporate cash policy, we identify a sample of 949 firms that announced accounting restatements from 1997 through 2006 (GAO, 2003, 2006). Following Hennes, Leone, and Miller (2008), we partition the restatements into those related to accounting irregularities and those related to errors. Our final sample contains 270 irregularity-related restatements and 679 error-related restatements. To ensure that any change in cash holdings after a restatement is not driven by an intertemporal trend in cash holdings (Bates, Kahle, & Stulz, 2009), we match each restatement firm with a non-restatement firm based on a propensity score, and we conduct a difference-indifferences test. We include a number of covariates that are associated with accounting restatements and corporate cash holdings to estimate the propensity score (Roberts & Whited, 2013).