Juergen Jung

Does health insurance decrease health expenditure risk in developing countries? The case of China

This article studies the impact of health insurance on individual out-of-pocket health expenditures in China. Using China Health and Nutrition Survey data between 1991 and 2006, we apply two-part and sample selection models to address issues caused by censored data and selection on unobservables. We find that, although the probability of accessing health care increases with the availability of health insurance, the level of out-of-pocket health expenditure decreases. Our results from a selection model with instrumental variables suggest that having health insurance reduces the expected out-of-pocket health expenditure of an individual by 29.42% unconditionally. Meanwhile, conditional on being subjected to positive health expenditure, health insurance helps reduce out-of-pocket spending by 44.38%. This beneficial effect of health insurance weakens over time, which may be attributable to increases in the coinsurance rates of health insurances in China.

Fiscal Austerity Measures: Spending Cuts vs. Tax Increases

We formulate an overlapping generations model with skill heterogeneity and productive and non-productive government programs to study the macroeconomic and intergenerational welfare effects caused by risk premium shocks and government debt reductions. We demonstrate that in a small open economy with a high level of debt-to-GDP ratio a small increase in the risk premium leads to substantial output contraction and negative welfare effects. Next, we quantify the effects of reducing the debt-to-GDP ratio using a wide range of fiscal austerity measures. These reforms result in trade-offs between short-run contractions and long-run expansions in aggregate output. In addition, the spending-based austerity reform is dominated by the tax-based reform in terms of income in the short run, but becomes dominant in the long run. The welfare effects vary significantly across generations, depending on fiscal austerity measures, skills and working sector. The current old and middle age generations experience welfare losses while current young workers and future generations are beneficiaries of the reforms. A mixed reform results in the largest welfare effects.

The Timing of Redistribution

We investigate whether late redistribution programs that can be targeted toward low income families, but that may distort savings decisions, can “dominate” early redistribution programs that cannot be targeted as a result of information constraints. We use simple two-period overlapping generations models with heterogeneous agents under six policy regimes: a model calibrated to the U.S. economy (benchmark), two early redistribution (lump sum) regimes, two (targeted) late redistribution regimes, and finally a model without taxes and redistribution. Redistribution programs are financed by a labor tax on the young generation and a capital tax on the old generation. We argue that if the programs are small in size, late redistribution can dominate early redistribution in terms of welfare but not in terms of real output. Better targeting of low income households cannot completely offset savings distortions. In addition, we find that the optimal transfer and tax policy implies a capital tax of 100% and transfers exclusively to the young generation.

A Macroeconomic Analysis of Energy Subsidies in a Small Open Economy: The Case of Egypt

We construct a dynamic general equilibrium model to analyze the effects of large energy subsidies in a small open economy. The model pays special attention to domestic energy production and consumption, trade in energy at world market prices, as well as private and public sector production including the provision of public infrastructure. The model is calibrated to data from Egypt and then used to study policy reforms such as reductions in energy subsidies with corresponding reductions in consumption taxes, labor taxes, capital taxes, or increases in infrastructure investment. We calculate the new steady states, the transition paths to the new steady state and the size of the associated welfare losses or gains. In response to a 15 percent cut in energy subsidies, GDP may fall as less energy is used in production. Excess energy is exported and capital imports are reduced. Welfare in consumption equivalent terms can rise by up to 0.6 percent of GDP. Gains in output can be realized only if the government re-invests into infrastructure.

Public Sector Pension Policies and Capital Accumulation in An Emerging Economy: The Case of Brazil

In many emerging economies such as Brazil, pension programs of public sector workers are more generous than pension programs of private sector workers. The opportunity costs of running generous public pension schemes for civil servants are potentially large in emerging economies that often suffer from low public investments in education and infrastructure. In this paper, we develop a two-sector dynamic general equilibrium framework to quantify these opportunity cost effects. We find that the efficiency and welfare gains of reallocating government resources from non-productive public sector pensions to productive public education and infrastructure investments are larger than the welfare effects created by classic public pension reforms that simply reduce savings and tax distortions by making pensions less generous. Calculating transitions to the post-reform steady state, we find that welfare losses for the generation born before the reform are offset by welfare gains by the generations born after the reform.