Government Relief for Risk Associated with Government Action
AbstractA significant source of risk arises from uncertainty concerning future government policy. Government action--tax reform, deregulation, judicial decisions, budgetary shifts--produces gains and losses for those who invested under preexisting rules. The effects of government relief--compensation, grandfathering, phase-ins--on ex ante incentives and risk bearing are examined using a model in which private insurance is available. It is demonstrated that government relief is inefficient, even when private insurance is subject to moral hazard, because relief shields individuals from some of the effects of their actions. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 94 (1992)
Issue (Month): 4 ()
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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Louis Kaplow, 1993. "Government Relief for Risk Associated with Government Action," NBER Working Papers 3006, National Bureau of Economic Research, Inc.
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