John T. Addison (University of South Carolina (U.S.A.), GEMF/Universidade de Coimbra (Portugal) and IZA (Germany)) C. R. Barrett (University of Birmingham) W. S. Siebert (University of Birmingham (UK) and IZA (Germany))
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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.
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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number
2005-16.
Length: 39 pages Date of creation: 2005 Date of revision: Publication status: Published in Portuguese Economic Journal, 2006, 5(2), 69-87 Handle: RePEc:gmf:wpaper:2005-16
Find related papers by JEL classification: D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
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