Jean-Marie Lozachmeur

Optimal Retirement and Disability Benefits with Audit

This paper studies the design of retirement and disability policies when individuals differ in both productivity and health. The second-best solution implies (downward) distortions in the (per-period) labor supply and in the choice of retirement age for some individuals, and lesser redistribution towards workers with poor health and low productivity. This problem can be mitigated when disability screening is available. Optimal disability screening involves a random component; it is never optimal to audit all individuals who claim to be disabled. The optimal audit probability strikes a balance between audit costs and benefits obtained by relaxing an otherwise binding incentive constraint.

Fiscal Competition, Labor Mobility, and Unemployment

This paper provides an analytical framework to study fiscal competition between two countries when the strategic instrument is the payroll tax raised to finance unemployment benefits. Each countrys production sector uses immobile skilled and mobile unskilled workers. Unemployment arises as a consequence of a minimum wage in the unskilled sector. It is shown that when the countries are symmetric, (i) fiscal competition leads to an underprovision of unemployment benefits and (ii) tax rates are strategic substitutes for sufficiently high values of the relative risk aversion parameter. Some numerical illustrations are presented for the case of asymmetric countries.

Health insurance and diversity of treatment

We determine the optimal health policy mix when the average utility of patients increases with the supply of drugs available in a therapeutic class. Health risk coverage relies on two instruments, copayment and reference pricing, both of which affect the risk associated with health expenses and diversity of treatment. For a fixed supply of drugs, the reference pricing policy aims at minimizing expenses, in which case the equilibrium price of drugs is independent of the copayment rate. However, with an endogenous supply of drugs, diversity of treatment may susbtitute for insurance so that the reference pricing may depart from maximal cost-containment in order to promote entry. We next analyze the determinants of the optimal policy. While an increase in risk aversion, or in the side effect loss, increases diversity and decreases the copayment rate, an increase in entry cost decreases both diversity and the copayment rate.

The design of long term care insurance contracts

This paper studies the design of long term care (LTC) insurance contracts in the presence of ex post moral hazard. While this problem bears some similarity with the study of health insurance (Blomqvist, 1997) the significance of informal LTC affects the problem in several crucial ways. It introduces the potential crowding out of informal care by market care financed through insurance coverage. Furthermore, the information structure becomes more intricate. Informal care is not publicly observable and, unlike the insurer, caregivers know the true needs of their relatives. We determine the optimal second-best contract and show that the optimal reimbursement rate can be written as an A-B-C expression à la Diamond (1998). These terms respectively reflect the efficiency loss as measured by the inverse of the demand elasticity, the distribution of needs and the preferences for risk sharing. Interestingly, informal care directly affects only the first term. More precisely the first term decreases with the presence and significance of informal care. Roughly speaking this means that an efficient LTC insurance contract should offer lower (marginal) reimbursement rates than its counterpart in a health insurance context.

The Pricing of Cross-Border Parcel Delivery Services

The role of parcel delivery services in cross-border e-commerce is a hotly debated topic within the EU and beyond. While volumes of domestic e-commerce have increased dramatically over the last years in all member States, cross-border purchases remain lower, even though the latest figures released by E-commerce Europe (2016) showed an acceleration of cross-border transactions. This can be explained by a variety of factors including language and cultural barriers and bureaucratic obstacles (in particular the complexity of VAT regimes—see E-commerce Europe last cross-border barometer) but also simply by the fact that goods are available on the domestic market without any significant price differential. The EU Commission has recently launched a proposal that focuses on parcel delivery services and particularly their pricing as an alleged major impediment for the development of cross-border e-commerce (European Commission 2016).