The Supply of Social Insurance
AbstractWe propose a theory of the welfare state, in which social transfers are chosen by a governing group interacting with non-governing groups repeatedly. Social demands from the non-governing groups are credible because these groups have the ability to generate social conflict. In this context social insurance is supplied as an equilibrium response to income risks within a self-enforcing social contract. When we explore the implications of such a view of the social contract, we find four main determinants of the welfare state: the degree of aggregate income risk; the heterogeneity of group-specific income risks; the public administration’s ability to implement group-specific transfers; and the ability of the nongoverning groups to coordinate their social demands. We also analyze the link between public good provision and social insurance.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0772.
Date of creation: Dec 2007
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This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-13 (All new papers)
- NEP-IAS-2008-06-13 (Insurance Economics)
- NEP-SOC-2008-06-13 (Social Norms & Social Capital)
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