A Continuous Model of Income Insurance
AbstractWe develop a simple yet realistic model of income insurance, where the individual’s ability and willingness to work is treated as a continuous variable. In this framework, income insurance not only provides income smoothing, it also relieves the individual from particularly burdensome work. As a result, the individual adjusts his labor supply in a continuous fashion to the implicit tax wedge of the insurance system. Moral hazard, in the sense that an individual receives insurance benefits without actually being fully qualified, also becomes a matter of degree. Moreover, our continuous framework makes it easy to analyze both the role of administrative rejection of claims, and the role of social norms, for the utilization of insurance.
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Bibliographic InfoPaper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 756.
Length: 39 pages
Date of creation: 29 Aug 2008
Date of revision:
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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Web page: http://www.iies.su.se/
More information through EDIRC
Moral hazard; disability insurance; work absence; administrative rejection; asymmetric information; social norms;
Other versions of this item:
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-09-13 (All new papers)
- NEP-CTA-2008-09-13 (Contract Theory & Applications)
- NEP-IAS-2008-09-13 (Insurance Economics)
- NEP-LAB-2008-09-13 (Labour Economics)
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