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Insurance design in the presence of safety nets

Teh, Tse-Ling (2017) Insurance design in the presence of safety nets. Journal of Public Economics, 149. pp. 47-58. ISSN 0047-2727

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Abstract

Safety net assistance and insurance exist to manage risk and improve welfare. This shared goal may lead to crowding out. In a new approach, this paper analyzes the interaction of assistance with two dimensions of insurance design: level of coverage and types of risks covered. In a society of risk averse vulnerable individuals and risk neutral assistance providers, Pareto improvements in welfare are achieved through incom- pleteness in the types of risks covered. The results imply that safety nets promote demand for and the emergence of incomplete insurance. These results have a wide application to insurance markets where safety nets are available, including health care, disaster aid and social welfare.

Item Type: Article
Official URL: https://www.journals.elsevier.com/journal-of-publi...
Additional Information: © 2017 Elsevier
Subjects: H Social Sciences > HG Finance
Sets: Research centres and groups > Grantham Research Institute on Climate Change and the Environment
Identification Number: 10.1016/j.jpubeco.2017.03.001
Date Deposited: 20 Mar 2017 09:49
Last Modified: 19 Jul 2017 12:55
URI: http://eprints.lse.ac.uk/id/eprint/69870

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