Policy-Oriented Parties and the Choice between Social and Private Insurance
AbstractWe study the political economy of social insurance in a world where individuals differ in both income and risk. Social insurance is financed through distortionary taxation and redistributes across income and risk. Individuals vote on social insurance that they can complement with insurance bought on the private market. Private insurance is actuarially fair but suffers from adverse selection, which results in a screening equilibrium with partial coverage. The equilibrium social insurance is the result of an electoral competition game where parties maximize the utility of their members. We calculate the equilibrium social insurance offered by the two parties as well as their equilibrium membership, and study how the equilibrium outcome is affected by electoral uncertainty, distortions from taxation, risk aversion and the distribution of risk and income. We then calibrate the model to US data from the PSID survey. Lastly, we study how the political demand for social insurance is affected by the possibility to redistribute through income taxation.
Download InfoIf 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.
Bibliographic InfoPaper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 226.
Date of creation: 2003
Date of revision:
Contact details of provider:
Postal: Manufacture des Tabacs, Aile Jean-Jacques Laffont, 21 Allée de Brienne, 31000 TOULOUSE
Phone: +33 (0)5 61 12 85 89
Fax: + 33 (0)5 61 12 86 37
Web page: http://www.idei.fr/
More information through EDIRC
Other versions of this item:
- DE DONDER, Philippe & HINDRIKS, Jean, 2003. "Policy-oriented parties and the choice between social and private insurance," CORE Discussion Papers 2003064, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- De Donder, Philippe & Hindricks, Jean, 2005. "Policy-oriented Parties and the Choice Between Social and Private Insurance," CEPR Discussion Papers 4864, C.E.P.R. Discussion Papers.
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-30 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Miguel Gouveia, 1997.
"Majority rule and the public provision of a private good,"
Springer, vol. 93(3), pages 221-244, December.
- Gouveia, Miguel, 1997. " Majority Rule and the Public Provision of a Private Good," Public Choice, Springer, vol. 93(3-4), pages 221-44, December.
- Blomqvist, Ake & Horn, Henrik, 1984. "Public health insurance and optimal income taxation," Journal of Public Economics, Elsevier, vol. 24(3), pages 353-371, August.
- CREMER, Helmuth & PESTIEAU, Pierre, 1995.
"Redistributive Taxation and Social Insurance,"
CORE Discussion Papers
1995054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Joel Shapiro, 2001. "Income maintenance programs and multidimensional screening," Economics Working Papers 544, Department of Economics and Business, Universitat Pompeu Fabra.
- Hindriks, Jean & De Donder, Philippe, 2003.
"The politics of redistributive social insurance,"
Journal of Public Economics,
Elsevier, vol. 87(12), pages 2639-2660, December.
- HINDRIKS, Jean & DE DONDER, Philippe, 2001. "The politics of redistributive social insurance," CORE Discussion Papers 2001054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- De Donder, Philippe & Hindriks, Jean, 2003. "The Politics of Redistributive Social Insurance," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Jean Hindriks & Philippe De Donder, 2001. "The Politics of Redistributive Social Insurance," Working Papers 444, Queen Mary, University of London, School of Economics and Finance.
- Petretto, Alessandro, 1999. "Optimal social health insurance with supplementary private insurance," Journal of Health Economics, Elsevier, vol. 18(6), pages 727-745, December.
- Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.