Income Contingent Loans for Social Policy: the Case of Paid Parental Leave

Timothy Higgins
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Timothy Higgins: The Australian National University

Chapter 9 in Contemporary Issues in Microeconomics, 2016, pp 159-168 from Palgrave Macmillan

Abstract: Abstract Income contingent loans (ICL) may provide an efficient and equitable option for extending taxpayer-funded paid parental leave (PPL) schemes, which may be otherwise limited in duration and payment amounts due to fiscal pressures. A lack of liquidity and market failure can prevent families from financing an extension of leave beyond that typically offered in most OECD countries through taxpayer-funded PPL. It is argued that an ICL could provide consumption smoothing and encourage participation, yet taxpayer costs could be kept low (if not zero) provided scheme design mitigates against adverse selection and moral hazard. An appropriately designed scheme could also be welfare enhancing to parents even in the absence of taxpayer subsidies.

Keywords: Moral Hazard; Real Interest Rate; Adverse Selection; Parental Leave; Contemporary Issue (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:pal:intecp:978-1-137-52971-8_10

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DOI: 10.1057/9781137529718_10

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