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The Politics of Redistributive Social Insurance

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Author Info
Jean Hindriks (Queen Mary, University of London)
Philippe De Donder (IDEI, University of Toulouse 1)

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Abstract

This 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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Publisher Info
Paper provided by Queen Mary, University of London, Department of Economics in its series Working Papers with number 444.

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Date of creation: Oct 2001
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Handle: RePEc:qmw:qmwecw:wp444

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Related research
Keywords: Majority rule Social insurance Redistribution Adverse selection

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Find related papers by JEL classification:
H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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  1. DE DONDER, Philippe & HINDRIKS, Jean, 2006. "Does Propitious Selection Explain why Riskier People buy less Insurance?," IDEI Working Papers 399, Institut d'Économie Industrielle (IDEI), Toulouse. [Downloadable!]
    Other versions:
  2. Boadway, Robin & Leite-Monteiro, Manuel & Marchand, Maurice G. & Pestieau, Pierre, 2004. "Social Insurance and Redistribution with Moral Hazard and Adverse Selection," CEPR Discussion Papers 4253, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Giuseppe, DE FEO & Jean, HINDRIKS, 2005. "Efficiency of Competition in Insurance Markets with Adverse Selection," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005042, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  4. 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. [Downloadable!] (restricted)
    Other versions:
  5. Philippe, DE DONDER & Jean, HINDRIKS, 2006. "Equilibrium Social Insurance with Policy-Motivated Parties," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2006018, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
  6. Alexander K. Koch & Albrecht Morgenstern, 2005. "From Team Spirit to Jealousy: The Pitfalls of Too Much Transparency," IZA Discussion Papers 1661, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Robin Boadway & Manuel Leite-Monteiro & Maurice Marchand & Pierre Pestieau, 2002. "Social Insurance and Redistribution," Working Papers 1004, Queen's University, Department of Economics. [Downloadable!]
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This page was last updated on 2008-10-30.

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