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Building blocks in the economics of mandates

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Author Info

  • John Addison

    ()

  • Richard Barrett
  • W. Siebert

Abstract

The paper constructs an asymmetric information model to investigate the efficiency and equity cases for government mandated benefits. A mandate can improve workers' insurance, and may also redistribute in favour of more "deserving" workers. The risk is that it may also reduce output. The more diverse are free market contracts – separating the various worker types – the more likely it is that such output effects will on balance serve to reduce welfare. It is shown that adverse effects can be reduced by restricting mandates to larger firms. An alternative to a mandate is direct government provision. We demonstrate that direct government provision has the advantage over mandates of preserving separations.

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10258-006-0009-2
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Bibliographic Info

Article provided by Springer in its journal Portuguese Economic Journal.

Volume (Year): 5 (2006)
Issue (Month): 2 (August)
Pages: 69-87

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Handle: RePEc:spr:portec:v:5:y:2006:i:2:p:69-87

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Web page: http://link.springer.de/link/service/journals/10258/index.htm

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Related research

Keywords: Asymmetric information; Labour mandates; Compensation packages; D82; J33;

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References

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  1. Stewart, Jay, 1994. "The Welfare Implications of Moral Hazard and Adverse Selection in Competitive Insurance Markets," Economic Inquiry, Western Economic Association International, vol. 32(2), pages 193-208, April.
  2. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
  3. Alan Krueger, 1999. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," Working Papers 803, Princeton University, Department of Economics, Industrial Relations Section..
  4. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  5. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
  6. Aghion, P. & Hermalin, B., 1990. "Legal Restrictions on Private Contracts Can Enhance Efficiency," DELTA Working Papers 90-14, DELTA (Ecole normale supérieure).
  7. Levine, David I, 1991. "Just-Cause Employment Policies in the Presence of Worker Adverse Selection," Journal of Labor Economics, University of Chicago Press, vol. 9(3), pages 294-305, July.
  8. Christopher J. Ruhm, 1998. "The Economic Consequences Of Parental Leave Mandates: Lessons From Europe," The Quarterly Journal of Economics, MIT Press, vol. 113(1), pages 285-317, February.
  9. Hellwig,Martin, 1986. "Some recent developments in the theory of competition in markets with adverse selection," Discussion Paper Serie A 82, University of Bonn, Germany.
  10. Charles Blackorby & David Donaldson, & John A. Weymark, 1997. "Social Aggregation and the Expected Utility Hypothesis," Old UBC Departmental Papers 9705, UBC Department of Economics.
  11. Dionne, Georges & Lasserre, Pierre, 1987. "Adverse selection and finite-horizon insurance contracts," European Economic Review, Elsevier, vol. 31(4), pages 843-861, June.
  12. Krueger, Alan B., 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact1," Labour Economics, Elsevier, vol. 7(2), pages 117-134, March.
  13. Harsanyi,John C., 1986. "Rational Behaviour and Bargaining Equilibrium in Games and Social Situations," Cambridge Books, Cambridge University Press, number 9780521311830.
  14. Cooper, Russell & Hayes, Beth, 1987. "Multi-period insurance contracts," International Journal of Industrial Organization, Elsevier, vol. 5(2), pages 211-231.
  15. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-83, May.
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Cited by:
  1. Blandina Oliveira & Adelino Fortunato, 2005. "The Dynamics of the Growth of Firms: Evidence from the Services Sector," GEMF Working Papers 2005-04, GEMF - Faculdade de Economia, Universidade de Coimbra.

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