Advanced Search
MyIDEAS: Login

Collective risk sharing: The social safety net and employment

Contents:

Author Info

  • Torben M. Andersen

    ()
    (Department of Economics and Business, Aarhus University, Denmark)

Registered author(s):

    Abstract

    The direct effects as well as the policy responses to the financial crisis have raised the issue whether individuals carry too large costs and consequences of changes which are beyond their control and influence. Collective risk sharing is considered insufficient and in need of expansion. The policy focus is thus shifting from incentives to insurance, and it is debated how welfare state arrangements can trade-off efficiency and equity concerns. While this trade-off is core to economics, most policy analyses and advice focus only on the incentive or distortion side. This paper looks at the insurance side based on the fact that it is impossible to separate redistribution from collective risk sharing. It is argued that insurance effects are crucial for behavioural responses and hence the relation between efficiency and equity. However, two factors limit the scope for collective risk sharing, namely, adverse incentive effects (common pool) and the nature of shocks. It is argued that the former depends crucially on policy design, and in particular the extent to which eligibility criteria in the social safety net have an active focus on job search and employment. Collective risk sharing schemes are vulnerable to persistent shocks, and it is an important question whether welfare arrangements themselves are a source of more inertia or persistence in the adjustment process. It is argued that there is no evidence that this is the case, but nonetheless persistent shocks pose a serious challenge to an extended welfare state.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: ftp://ftp.econ.au.dk/afn/wp/11/wp11_02.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by School of Economics and Management, University of Aarhus in its series Economics Working Papers with number 2011-02.

    as in new window
    Length: 28
    Date of creation: 24 Jan 2011
    Date of revision:
    Handle: RePEc:aah:aarhec:2011-02

    Contact details of provider:
    Web page: http://www.econ.au.dk/afn/

    Related research

    Keywords: Risk; insurance; common pool; shocks; persistence;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:aah:aarhec:2011-02. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.