UNSPECIFIED (2000) Social insurance with risk-reducing investments. ECONOMICA, 67 (265). pp. 37-56. ISSN 0013-0427

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Abstract

A two-sector model with sector-dependent disability risks is presented. Working in the low-risk sector requires skills that can be obtained by investments in education. Moral hazard precludes full insurance. The labour force allocation is responsive to the incentives created by a social insurance system. The rationale for intervention lies in the government's power to cross-subsidize between the sectors, and it is demonstrated how the responsiveness of the labour force allocation limits cross-subsidization. The second-best policy is time-inconsistent. The consistent equilibrium is explored and is argued to provide weak incentives to reduce risks.

Item Type:	Journal Article
Subjects:	H Social Sciences > HC Economic History and Conditions
Journal or Publication Title:	ECONOMICA
Publisher:	BLACKWELL PUBL LTD
ISSN:	0013-0427
Date:	February 2000
Volume:	67
Number:	265
Number of Pages:	20
Page Range:	pp. 37-56
Publication Status:	Published
URI:	http://wrap.warwick.ac.uk/id/eprint/13661

Data sourced from Thomson Reuters' Web of Knowledge

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