Idiosyncratic Risk in the United States and Sweden: Is There a Role for Government Insurance?

Martin Floden () and Jesper Lindé

Review of Economic Dynamics, 2001, vol. 4, issue 2, pages 406-437

Abstract: We examine the effects of government redistribution schemes in an economy where agents are subject to uninsurable, individual specific productivity risk. In particular, we consider the trade-off between positive insurance effects and negative distortions on labor supply and saving. We parameterize the model by estimating productivity processes on Swedish and U.S. data. The estimation results show that agents in the United States are subject to more idiosyncratic risk than agents in Sweden. Although distortions are significant, the welfare benefits of government redistribution and insurance systems can be substantial. (Copyright: Elsevier)

Keywords: idiosyncratic risk; inequality; social insurance; redistribution; distributions (search for similar items in EconPapers)
JEL-codes: E20 H21 (search for similar items in EconPapers)
Date: 2001
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Related works:
Working Paper: Idiosyncratic Risk in the U.S. and Sweden: Is there a Role for Government Insurance? (1998)
Working Paper: Idiosynchratic Risk in the U.S. and Sweden: Is there a Role for Government Insurance? (1998)
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