Social insurance and redistribution with moral hazard and adverse selection

Robin Boadway, Manuel Leite-Monteiro, Maurice Marchand and Pierre Pestieau
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Maurice Marchand: UCL - Université Catholique de Louvain = Catholic University of Louvain

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Abstract: Rochet (1991) showed 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. We study how equity and efficiency considerations should be traded off in choosing the optimal coverage of social insurance when those features are introduced. The case for social insurance is strongest when the government is well informed about household productivity.

Date: 2006-07
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Citations: View citations in EconPapers (25)

Published in Scandinavian Journal of Economics, 2006, 108 (2), pp.279-298. ⟨10.1111/j.1467-9442.2006.00446.x⟩

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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 (2004)
Working Paper: Social Insurance and Redistribution with Moral Hazard and Adverse Selection (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754141

DOI: 10.1111/j.1467-9442.2006.00446.x

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