Optimal Social Insurance: Insights from a Continuous-Time Stochastic Setup

João Amador () and Pedro G. Rodrigues

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper focuses on the determinants of the optimal level of social insurance, thus contributing to explain its cross-country variation. In a continuous-time stochastic endogenous growth setup, it is a form of public insurance against idiosyncratic shocks affecting the income, as well as the dependency ratio of an individual household. Such shocks include, for example, illness, disability, unemployment, or changes in the number of infants and elderly in care. We conclude that a higher average dependency ratio and a higher covariance between technological and dependency shocks both decrease the optimal amount of social insurance. In addition, a higher variance of technological shocks does not affect optimal decisions, while a higher variance of dependency shocks increases optimal social insurance, provided the covariance between technological and dependency shocks is not very negative.

JEL-codes: C61 H55 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bportugal.pt/sites/default/files/anexos/papers/wp202101.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w202101

Access Statistics for this paper

More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC.
Bibliographic data for series maintained by DEE-NTD ().