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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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Identification Number: 10.1016/j.jpubeco.2017.03.001


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
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Additional Information: © 2017 Elsevier
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HG Finance
Date Deposited: 20 Mar 2017 09:49
Last Modified: 07 Mar 2024 18:09

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