Social Insurance and Redistribution with Moral Hazard and Adverse Selection

Pierre Pestieau, Maurice G. Marchand, Robin Boadway and Manuel Leite-Monteiro

No 4253, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper starts from the result of Rochet (1989), that with distortionary income taxes social insurance is a desirable redistributive device when risk and ability are negatively correlated. This finding is re-examined when ex post moral hazard and adverse selection are included, and under different informational assumptions. Individuals can take actions influencing the size of the loss in the event of accident (or ill health). Social insurance can be supplemented by private insurance, but private insurance markets are affected by both adverse selection and moral hazard. The main purpose of the present Paper is to study how equity and efficiency considerations should be traded off in choosing the optimal coverage of social insurance when those features are introduced.

Keywords: Social insurance; Redistribution; Market failures (search for similar items in EconPapers)
JEL-codes: H23 H51 (search for similar items in EconPapers)
Date: 2004-02
New Economics Papers: this item is included in nep-pbe and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Social Insurance and Redistribution with Moral Hazard and Adverse Selection* (2006)
Working Paper: Social insurance and redistribution with moral hazard and adverse selection (2006)
Working Paper: Social insurance and redistribution with moral hazard and adverse selection (2004)
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