Subsidizing risk prevention

Mario Menegatti

Journal of Economics, 2021, vol. 134, issue 2, No 4, 175-193

Abstract: Abstract This work examines the effects of different kinds of subsidies on risk prevention from a theoretical standpoint. We show that both a subsidy on the cost of prevention activities and a subsidy on wealth have ambiguous effects on the level of present contemporaneous prevention. Similar kinds of subsidies have however increasing effects on the level of advance prevention and, under plausible assumptions, on future levels of contemporaneous prevention. We also show that social security subsidies may have decreasing effects on prevention activities while a kind of reverse social security has an increasing effects on them. This indicates that there is a trade-off between the social security aim of mitigating the negative consequences of bad events and the prevention aim of incentivizing choices which reduce the probability that these bad events occur.

Keywords: Prevention; Risk; Subsidy; Social security; D81; H24 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:kap:jeczfn:v:134:y:2021:i:2:d:10.1007_s00712-021-00744-w

DOI: 10.1007/s00712-021-00744-w

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