Research Papers in Economics, Department of Economics, Stockholm University
Lena Nekby, Mahmood Arai and Michael Lundholm
Economics of Scale and Sorting in Pure vs. Mutual Insurance Societies: Evidence from Historical Data
Abstract: Based on unique Swedish historical panel data on voluntary
Swedish sick insurance societies 1902-1910, we test the hypothesis od
economies of scale in sick insurance provision. We report results
indicating that pure insurance societies charging only premium ex ante do
not exhibit returns to scale, while mutual insurance societies, who levy
both an ex ante premium and an ex post assessment, do. We argue that this
is due to a sorting mechanism implying that pure insurance societies
attract high risk workers as they expand.
Keywords: friendly societies; sick insurance; health insurance; returns to scale; (follow links to similar papers)
JEL-Codes: G22; I18; N23; (follow links to similar papers)
23 pages, September 12, 2001
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