Economic Efficiency and Mixed Public/Private Insurance

Ake Blomqvist and Johansson, Per-Olov ()
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Johansson, Per-Olov: Centre for Health Economics, Postal: Stockholm School of Economics, Box 6501, S-113 83 STOCKHOLM, SWEDEN

No 110, Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper we discuss the efficiency properties of insurance markets where supplementary private insurance is allowed to exist together with a compulsory government insurance plan. Our main conclusion, which is contrary to both those of Besley (1989) and Selden (1993), is that in a simple model focussing on the moral hazard problem alone, a mixed system will generally be strictly less efficient than a purely private (competitive) system. We also show that there is a flaw in Selden's (1993) main proposition, which at least in part invalidates his result on the welfare properties of systems of mixed government/private insurance.

Keywords: Health insurance; moral hazard; optimal insurance; government insurance (search for similar items in EconPapers)
JEL-codes: I18 H42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-ias, nep-mic, nep-pbe, nep-pol and nep-pub
Date: 1996-03
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Published in Journal of Public Economics, 1997, pages 505-516.

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Journal Article: Economic efficiency and mixed public/private insurance (1997)
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Persistent link: http://EconPapers.repec.org/RePEc:hhs:hastef:0110

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