Title: Macroeconomic uncertainty and the demand for secondary health insurance: Evidence from Bayesian quantile SVARs
Authors: Annika Camehl - Erasmus University Rotterdam (Netherlands) [presenting]
Kathrin Gruber - Erasmus University Rotterdam (Netherlands)
Abstract: A Bayesian quantile structural vector autoregressive model is developed. It is applied to analyze the reaction of household secondary health insurance purchases to macroeconomic uncertainty shocks. We assume that the error terms follow a quantile-restricted overfitting finite Gaussian mixture distribution. This approach mitigates problems of employing the commonly used asymmetric Laplace distribution to the multivariate case. By analyzing quantiles, we uncover potential asymmetries in the reaction to uncertainty shocks from households with purchases above or below the median. We take variation in secondary health insurance spending, based on U.S. household expenditure data, as an indication that households have different risk perceptions. We then trace back heterogeneities in households' reactions to their socioeconomic characteristics. Our preliminary findings illustrate that household spending on secondary insurances products increases in response to uncertainty shocks. We identify these shocks by using exogenous proxy information. The intensity of the responses varies across quantiles, especially for households in birth cohorts in the early thirties and those in retirement age, with the strongest reaction visible for higher quantiles.