Transaction Costs and Overinsurance in Government Transfer Policy

Alvaro Javier Forteza ()

Journal of Applied Economics, 1999, vol. II, pages 311-335

Abstract: Benevolent governments lacking commitment ability provide too much insurance, if opportunistic private agents free ride on the government´s concern and exert too little effort expecting government assistance. Yet, the costs of implementing the transfer policy work as a commitment device, alleviating the credibility problem. Indeed, despite of the lack of commitment capacity, the government might provide incomplete insurance because of these transaction costs. Therefore, transaction costs can increase welfare by resolving the dynamic inconsistency faced by a welfare maximizing policymaker.

Keywords: Transfer policy; Transaction costs; Incomplete insurance. (search for similar items in EconPapers)
JEL-codes: D60 D82 H10 H30 I30 P16 (search for similar items in EconPapers)
Date: 1999
View list of references

Downloads: (external link)
http://www.cema.edu.ar/publicaciones/download/volume2/forteza.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:cem:jaecon:v:2:y:1999:n:2:p:311-335

Access Statistics for this article

Journal of Applied Economics is edited by Germán Coloma and Mariana Conte Grand and Jorge M. Streb

More articles in Journal of Applied Economics from Universidad del CEMA
Contact information at EDIRC.
Series data maintained by Valeria Dowding ().