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The Government, the Market, and the Problem of Catastrophic Loss

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  • Priest, George L
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    Abstract

    This article addresses the comparative advantage of the government to the private property/casualty insurance industry for the provision of insurance coverage for catastrophic losses. That the government can play an important role as an insurer of societal losses has been a central public policy principle since at least the New Deal. In addition, our government typically automatically provides forms of specific relief following unusually severe or unexpected disasters, which itself can be viewed as a form of ex post insurance. This article argues that for systemic reasons, the government is much less effective than the private property/casualty market in providing coverage of losses generally, but especially of losses in contexts of catastrophes. Copyright 1996 by Kluwer Academic Publishers

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Risk and Uncertainty.

    Volume (Year): 12 (1996)
    Issue (Month): 2-3 (May)
    Pages: 219-37

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    Handle: RePEc:kap:jrisku:v:12:y:1996:i:2-3:p:219-37

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    Cited by:
    1. Holthausen, Niels, 2006. "Ökonomische Bedeutung und Management von Naturrisiken im Wald: Theoretische Grundlagen und empirische Analysen nach dem Sturm Lothar (1999) in der Schweiz," Schriftenreihe Forstökonomie und Forstplanung, University of Freiburg, Chair of Forestry Economics and Planning, volume 26, number 26.
    2. Mahul, Olivier & Gurenko, Eugene, 2006. "The macro financing of natural hazards in developing countries," Policy Research Working Paper Series 4075, The World Bank.
    3. Botzen, W.J.W. & Aerts, J.C.J.H. & van den Bergh, J.C.J.M., 2009. "Willingness of homeowners to mitigate climate risk through insurance," Ecological Economics, Elsevier, vol. 68(8-9), pages 2265-2277, June.
    4. Steven Shavell, 2014. "A General Rationale for a Governmental Role in the Relief of Large Risks," NBER Working Papers 20192, National Bureau of Economic Research, Inc.
    5. Nathalie De Marcelis-Warin & Erwann Michel-Kerjan, 2003. "Catastrophe risk sharing and public-private partnerships : From natural disasters to terrorism," Working Papers hal-00242981, HAL.
    6. Barnett, Barry J. & Barrett, Christopher B. & Skees, Jerry R., 2008. "Poverty Traps and Index-Based Risk Transfer Products," World Development, Elsevier, vol. 36(10), pages 1766-1785, October.
    7. Skees, Jerry R., 2000. "A role for capital markets in natural disasters: a piece of the food security puzzle," Food Policy, Elsevier, vol. 25(3), pages 365-378, June.
    8. Paul Raschky & Hannelore Weck-Hannemann, 2007. "Charity hazard - A real hazard to natural disaster insurance," Working Papers 2007-04, Faculty of Economics and Statistics, University of Innsbruck.
    9. David I. Stern & Frank Jotzo & Leo Dobes, 2013. "The Economics of Global Climate Change: A Historical Literature Review," CCEP Working Papers 1307, Centre for Climate Economics & Policy, Crawford School of Public Policy, The Australian National University.
    10. Merrifield, John, 2002. "A general equilibrium analysis of the insurance bonding approach to pollution threats," Ecological Economics, Elsevier, vol. 40(1), pages 103-115, January.
    11. Anonymous & Roe, Terry L., 1999. "Policy Reform, Market Stability, And Food Security; Proceedings Of A Conference Of The International Agricultural Trade Research Consortium," Policy Reform, Market Stability, and Food Security Conference, June 26-27, 1998, Alexandria Virginia 14538, International Agricultural Trade Research Consortium.

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