Public and Private Insurance with Costly Transactions
AbstractWe characterize how public insurance schemes are constrained by hidden financial transactions. When non-exclusive private insurance entails increasing unit transaction costs, public transfers are only partly offset by hidden private transactions, and can influence consumption allocation. We show that efficient transfer schemes should take into account the impact of insurance on unobservable effort and saving choices as well as the relative cost of public and private insurance technologies. We provide suggestive evidence for the empirical relevance of these results by inspecting the cross-country relationship between available indicators of insurance transaction costs and variation in public and private insurance.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5201.
Length: 34 pages
Date of creation: Sep 2010
Date of revision:
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Other versions of this item:
- Bertola, Giuseppe & Koeniger, Winfried, 2010. "Public and Private Insurance with Costly Transactions," CEPR Discussion Papers 8062, C.E.P.R. Discussion Papers.
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-09 (All new papers)
- NEP-CTA-2010-10-09 (Contract Theory & Applications)
- NEP-IAS-2010-10-09 (Insurance Economics)
- NEP-MAC-2010-10-09 (Macroeconomics)
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