Taxation, insurance, and precautionary labor
AbstractWe examine optimal taxation and social insurance if insurance markets are imperfect. This requires the development of a theory of labor supply under uncertainty. We show that the case for social insurance is not generally reinforced by adverse selection in insurance markets as social insurance will have welfare-decreasing effects on the labor market. Furthermore, positive and normative implications are highly sensitive to the insurance market equilibrium concept. While for the Rothschild-Stiglitz case social insurance at least alleviates the ineffciency of underinsurance, with a Wilson pooling equilibrium this ineffciency might even be worsened by social insurance. This sheds new light on the question whether social insurance is an appropriate means of redistribution in the presence of an optimally chosen tax schedule.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Public Economics.
Volume (Year): 91 (2007)
Issue (Month): 7-8 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/505578
Other versions of this item:
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
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