The Politics of Redistributive Social Insurance
AbstractThis paper analyses the political support for social insurance that includes elements of redistribution when there exists an imperfect private insurance alternative. Individuals differ both in their income and risk. The social insurance is compulsory and charges an income-related contribution with pooling of risks. The private insurance is voluntary and charges a contribution based on individuals. However due to the adverse selection problem, private insurance companies provide only partial insurance. Adopting a non-expected utility model, we show that there is a general majority support for social insurance and that this support is increasing with risk aversion and correlation between risk and income. We also show that a mixed insurance is politically impossible, regardless of the degree of redistribution of social insurance and the joint distribution of risk and income in the population. Lastly, we analyse how the political support for social insurance is affected by any change in its redistributive component and the possibility of using genetic tests.
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Bibliographic InfoPaper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 444.
Date of creation: Oct 2001
Date of revision:
Majority rule; Social insurance; Redistribution; Adverse selection;
Other versions of this item:
- 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, . "The politics of redistributive social insurance," CORE Discussion Papers RP -1674, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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-2001-10-29 (All new papers)
- NEP-IAS-2001-10-29 (Insurance Economics)
- NEP-PBE-2001-10-29 (Public Economics)
- NEP-POL-2001-10-29 (Positive Political Economics)
- NEP-PUB-2001-10-29 (Public Finance)
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