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A Model of Income Insurance and Social Norms

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  • Lindbeck, Assar

    ()
    (The Research Institute of Industrial Economics)

  • Persson, Mats

    ()
    (Institute for International Economic Studies)

Abstract

A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a “moral hazard constraint” can make the individual abstain from fraud (“mimicking”). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willing­ness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.

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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 659.

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Length: 34 pages
Date of creation: 25 Jan 2006
Date of revision:
Handle: RePEc:hhs:iuiwop:0659

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Keywords: Moral Hazard; Sick Pay Insurance; Labor Supply; Asymmetric Information ;

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References

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  1. Diamond, P. A. & Mirrlees, J. A., 1978. "A model of social insurance with variable retirement," Journal of Public Economics, Elsevier, vol. 10(3), pages 295-336, December.
  2. 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.
  3. E. Glaeser & B. Sacerdote & Jose A. Scheinkman, 2003. "The Social Multiplier," Levine's Working Paper Archive 506439000000000130, David K. Levine.
  4. Barsky, Robert B, et al, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 537-79, May.
  5. De Meza, D. & Webb, D.C., 2000. "Advantageous Selection in Insurance Market," Discussion Papers 0007, Exeter University, Department of Economics.
  6. Daniel Eek & Klas Rikner, 2005. "What determines people's decisions whether or not to report sick?," Applied Economics, Taylor & Francis Journals, vol. 37(5), pages 533-543.
  7. Dionne, G., 1980. "Search and Insurance," Cahiers de recherche 8101, Universite de Montreal, Departement de sciences economiques.
  8. Barmby, Tim & Sessions, John G & Treble, John G, 1994. " Absenteeism, Efficiency Wages and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 561-66.
  9. Whinston, Michael D., 1983. "Moral hazard, adverse selection, and the optimal provision of social insurance," Journal of Public Economics, Elsevier, vol. 22(1), pages 49-71, October.
  10. Robert B. Barsky & Miles S. Kimball & F. Thomas Juster & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Survey," NBER Working Papers 5213, National Bureau of Economic Research, Inc.
  11. Allen, Steven G, 1981. "An Empirical Model of Work Attendance," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 77-87, February.
  12. Brown, Sarah & Sessions, John G, 1996. " The Economics of Absence: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 10(1), pages 23-53, March.
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Citations

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Cited by:
  1. Lindbeck, Assar, 2006. "The Welfare State -- Background, Achievements, Problems," Working Paper Series 662, Research Institute of Industrial Economics.
  2. Assar Lindbeck, 2006. "Sustainable social spending," International Tax and Public Finance, Springer, vol. 13(4), pages 303-324, August.
  3. Alessandro Balestrino, . "Tax Avoidance, Endogenous Social Norms, and the Comparison Income Effect," EPRU Working Paper Series 05-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics, revised Dec 2005.
  4. Lindbeck, Assar & Persson, Mats, 2010. "A Continuous Theory of Income Insurance," Working Paper Series 840, Research Institute of Industrial Economics.
  5. Lindbeck, Assar & Persson, Mats, 2008. "A Continuous Model of Income Insurance," Seminar Papers 756, Stockholm University, Institute for International Economic Studies.
  6. Lindbeck, Assar & Palme, Mårten & Persson, Mats, 2009. "Social Interaction and Sickness Absence," Research Papers in Economics 2009:4, Stockholm University, Department of Economics.
  7. Kroft, Kory, 2008. "Takeup, social multipliers and optimal social insurance," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 722-737, April.

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