Insurance design in the presence of safety nets

Tse-Ling Teh

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Safety net assistance and insurance exist to manage risk and improve welfare. This shared goal may lead to crowding out. In a new approach, this paper analyzes the interaction of assistance with two dimensions of insurance design: level of coverage and types of risks covered. In a society of risk averse vulnerable individuals and risk neutral assistance providers, Pareto improvements in welfare are achieved through incom- pleteness in the types of risks covered. The results imply that safety nets promote demand for and the emergence of incomplete insurance. These results have a wide application to insurance markets where safety nets are available, including health care, disaster aid and social welfare.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2017-05-01
New Economics Papers: this item is included in nep-hea and nep-ias
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Citations: View citations in EconPapers (4)

Published in Journal of Public Economics, 1, May, 2017, 149, pp. 47-58. ISSN: 0047-2727

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