XREAP 2010-3: An introduction to parametric and non-parametric models for bivariate positive insurance claim severity distributions

We present a real data set of claims amounts where costs related to damage are recorded separately from those related to medical expenses. Only claims with positive costs are considered here. Two approaches to density estimation are presented: a classical parametric and a semi-parametric method, based on transformation kernel density estimation. We explore the data set with standard univariate methods. We also propose ways to select the bandwidth and transformation parameters in the univariate case based on Bayesian methods. We indicate how to compare the results of alternative methods both looking at the shape of the overall density domain and exploring the density estimates in the right tail.

Pitt, D.; Guillén, M. (RFA-IREA)


XREAP 2010-4: Modelling dependence in a ratemaking procedure with multivariate Poisson regression models

When actuaries face with the problem of pricing an insurance contract that contains different types of coverage, such as a motor insurance or homeowner’s insurance policy, they usually assume that types of claim are independent. However, this assumption may not be realistic: several studies have shown that there is a positive correlation between types of claim. Here we introduce di®erent multivariate Poisson regression models in order to relax the independence assumption, including zero-in°ated models to account for excess of zeros and overdispersion. These models have been largely ignored to date, mainly because of their computational di±culties. Bayesian inference based on MCMC helps to solve this problem (and also lets us derive, for several quantities of interest, posterior summaries to account for uncertainty). Finally, these models are applied to an automobile insurance claims database with three different types of claims. We analyse the consequences for pure and loaded premiums when the independence assumption is relaxed by using different multivariate Poisson regression models and their zero-inflated versions.     

Bermúdez, Ll. (RFA-IREA), Karlis, D.


XREAP 2010-6: Movilidad ocupacional de los inmigrantes en una economía de bajas cualificaciones. El caso de España

Esta investigación analiza la movilidad ocupacional de los inmigrantes entre sus países de origen y España, así como sus principales determinantes. La misma se basa en los microdatos de la Encuesta Nacional de Inmigrantes y el uso de una escala de estatus ocupacional de carácter internacional (ISEI). La evidencia muestra que, por lo general, los inmigrantes sufren una fuerte degradación ocupacional en España con respecto a sus países de origen. Ésta se explica en buena medida por la intensa degradación que suelen experimentar al incorporarse al mercado de trabajo español, puesto que la mejora ocupacional asociada a su estancia en nuestro país es limitada. La degradación ocupacional al llegar es mayor para las mujeres, los inmigrantes de mayor nivel educativo y los procedentes de países en desarrollo. La recuperación posterior confirma la hipótesis de una movilidad ocupacional en forma de U profunda para los dos últimos colectivos, mientras que las mujeres padecen mayores dificultades para progresar ocupacionalmente. Residir en España, convalidar estudios extranjeros, aprender castellano y regularizar la situación documental mejoran el estatus ocupacional, pero, excepto en el último caso, de forma lenta. Acceder al primer empleo en España a través de redes informales tiene un efecto negativo sobre el logro ocupacional. Por último, mayor tiempo buscando empleo y una búsqueda de trabajo que incluya la movilidad geográfica se traducen en una mejora ocupacional mayor, mientras que el desempleo tiene un efecto negativo.

Simón, H. (IEB), Ramos, R. (AQR-IREA), Sanromá, E. (IEB)


XREAP 2010-5:Parental education and family characteristics: educational opportunities across cohorts in Italy and Spain

Drawing on data contained in the 2005 EU-SILC, this paper investigates the disparities in educational opportunities in Italy and Spain. Its main objective is to analyse the predicted probabilities of successfully completing upper-secondary and tertiary education for individuals with different parental backgrounds, and the changes in these probabilities across birth cohorts extending from 1940 to 1980. The results suggest that the disparities in tertiary education opportunities in Italy tend to increase over time. By contrast, the gap in educational opportunity in Spain shows a marked decrease across the cohorts. Moreover, by using an intuitive decomposition strategy, the paper shows that a large part of the educational gap between individuals of different backgrounds is “composed” of the difference in the endowment of family characteristics. Specifically, it seems that more highly educated parents are more able to endow their children with a better composition of family characteristics, which accounts for a significant proportion of the disparities in educational opportunity.

Di Paolo, A. (GEAP & IEB)  Published in Revista de Economía Aplicada, forthcoming


XREAP 2010-7: Language knowledge and earnings in Catalonia

This paper investigates the economic value of Catalan knowledge for national and foreign first- and second-generation immigrants in Catalonia. Specifically, drawing on data from the “Survey on Living Conditions and Habits of the Catalan Population (2006)”, we want to quantify the expected earnings differential between individuals who are proficient in Catalan and those who are not, taking into account the potential endogeneity between knowledge of Catalan and earnings. The results indicate the existence of a positive return to knowledge of Catalan, with a 7.5% increase in earnings estimated by OLS; however, when we account for the presence of endogeneity, monthly earnings are around 18% higher for individuals who are able to speak and write Catalan. However, we also find that language and education are complementary inputs for generating earnings in Catalonia, given that knowledge of Catalan increases monthly earnings only for more educated individuals.

Di Paolo, A. (GEAP & IEB); Raymond, J. Ll. (GEAP & IEB)  Publicat a Journal of Applied Economics, forthcoming


XREAP 2010-8: Prediction of the economic cost of individual long-term care in the Spanish population

Pensions together with savings and investments during active life are key elements of retirement planning. Motivation for personal choices about the standard of living, bequest and the replacement ratio of pension with respect to last salary income must be considered. This research contributes to the financial planning by helping to quantify long-term care economic needs. We estimate life expectancy from retirement age onwards. The economic cost of care per unit of service is linked to the expected time of needed care and the intensity of required services. The expected individual cost of long-term care from an onset of dependence is estimated separately for men and women. Assumptions on the mortality of the dependent people compared to the general population are introduced. Parameters defining eligibility for various forms of coverage by the universal public social care of the welfare system are addressed. The impact of the intensity of social services on individual predictions is assessed, and a partial coverage by standard private insurance products is also explored. Data were collected by the Spanish Institute of Statistics in two surveys conducted on the general Spanish population in 1999 and in 2008. Official mortality records and life table trends were used to create realistic scenarios for longevity. We find empirical evidence that the public long-term care system in Spain effectively mitigates the risk of incurring huge lifetime costs. We also find that the most vulnerable categories are citizens with moderate disabilities that do not qualify to obtain public social care support. In the Spanish case, the trends between 1999 and 2008 need to be further explored.

Bolancé, C. (RFA-IREA), Alemany, R. (RFA-IREA), Guillén, M. (RFA-IREA)


XREAP 2010-9: Knowledge of Catalan, public/private sector choice and earnings: Evidence from a double sample selection model

This paper explores the earnings return to Catalan knowledge for public and private workers in Catalonia. In doing so, we allow for a double simultaneous selection process. We consider, on the one hand, the non-random allocation of workers into one sector or another, and on the other, the potential self-selection into Catalan proficiency. In addition, when correcting the earnings equations, we take into account the correlation between the two selectivity rules. Our findings suggest that the apparent higher language return for public sector  workers is entirely accounted for by selection effects, whereas knowledge of Catalan has a significant positive return in the private sector, which is somewhat higher when the selection processes are taken into account.

Di Paolo, A. (GEAP & IEB)  Publicat a Hacienda Pública Española/Revista de Economía Pública, 197-(2/2011): 9-35


XREAP2010-10: Like milk or wine: Does firm performance improve with age?

Our empirical literature review shows that little is known about how firm performance changes with age, presumably because of the paucity of data on firm age. For Spanish manufacturing firms, we analyse the firm performance related to firm age between 1998 and 2006. We find evidence that firms improve with age, because ageing firms are observed to have steadily increasing levels of productivity, higher profits, larger size, lower debt ratios, and higher equity ratios. Furthermore, older firms are better able to convert sales growth into subsequent growth of profits and productivity. On the other hand, we also found evidence that firm performance deteriorates with age. Older firms have lower expected growth rates of sales, profits and productivity, they have lower profitability levels (when other variables such as size are controlled for), and also that they appear to be less capable to convert employment growth into growth of sales, profits and productivity.

Coad, A.; Segarra, A. (GRIT); Teruel, M. (GRIT)


XREAP2010-11: Exploring educational mobility in Europe

This paper is concerned with the investigation of the intergenerational mobility of education in several European countries and its changes across birth cohorts (1940-1980) using a new mobility index that considers the total degree of mobility as the weighted sum of mobility with respect to both parents. Moreover, this mobility index enables the analysis of the role of family characteristics as mediating factors in the statistical association between individual and parental education. We find that Nordic countries display lower levels of educational persistence but that the degree of mobility increases over time only in those countries with low initial levels. Moreover, the results suggest that the degree of mobility with respect to fathers and mothers converges to the same level and that family characteristics account for an important part of the statistical association between parental education and children’s schooling; a particular finding is that the most important elements of family characteristics are the family’s socio-economic status and educational assortative mating of the parents.

Di Paolo, A. (GEAP & IEB), Raymond, J. Ll. (GEAP & IEB), Calero, J. (IEB)