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Informal Family Insurance And The Design Of The Welfare State

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Author Info
Rafael Di Tella (Harvard University)
Robert MacCulloch (London School of Economics)

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Abstract

We study unemployment benefit provision when the family also provides social insurance. In the benchmark case, more generous State transfers crowd out family risk--sharing one--for--one. An extension gives the State an advantage in enforcing transfers through taxes (whereas families rely on self--enforcement). More generous State transfers lead to more than one--for--one reductions in intra--family insurance, so that total transfers to the unemployed fall as the State"s generosity increases. This does not imply that the optimal size of the Welfare State is zero. Our results still hold when families are assumed to be better than the State at monitoring job search activities of unemployed. Copyright 2002 Royal Economic Society

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Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 112 (2002)
Issue (Month): 481 (July)
Pages: 481-503
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Handle: RePEc:ecj:econjl:v:112:y:2002:i:481:p:481-503

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jonathan Thomas & Tim Worral, 2004. "Unemployment Insurance under Moral Hazard and Limited Commitment: Public versus Private Provision," ESE Discussion Papers 95, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  2. Robert MacCulloch, 2001. "Does Social Insurance Help Secure Property Rights?," STICERD - Development Economics Papers 31, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  3. Samuel Bentolila & Andrea Ichino, 2000. "Unemployment and Consumption: Are Job Losses Less Painful near the Mediterranean?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  4. Stefan Hochguertel & Henry Ohlsson, 2001. "Compensatory Inter Vivos Gifts," Macroeconomics 0012006, EconWPA. [Downloadable!]
    Other versions:
  5. Jonathan P Thomas & Tim Worrall, 2002. "Unemployment Insurance under Moral Hazard and Limited Commitment: Public vs Private Provision," Keele Economics Research Papers KERP 2002/20, Centre for Economic Research, Keele University. [Downloadable!]
    Other versions:
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