Moral hazard and public policy

Kim Pernell

Chapter 34 in Elgar Encyclopedia of Business and Government, 2026, pp 191-196 from Edward Elgar Publishing

Abstract: Over the past century, governments have increased the scale and scope of the economic and social safety nets they provide to individuals and organizations. One key concern is that this trend has amplified moral hazard, or the tendency for protected actors to assume more risk when they do not bear the costs of this behavior. This entry describes the existing literature on moral hazard in public policy and highlights directions for future research. Concerns about moral hazard cut across many policy domains, and these concerns play an important role in public policy research and in policy design. Yet empirical support for the predictions of moral hazard theory has been relatively weak and inconsistent. Future research in this area must subject key assumptions to empirical scrutiny, recognize the other behavioral effects of safety nets, and better establish scope conditions for moral hazard.

Keywords: Policy Effects; Moral Hazard; Risk; Government Protection; Safety Net; Organizational Behavior (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035307777
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