Risk Aversion, Insurance, and the Efficiency-Equality Tradeoff
AbstractUnder conditions of informational asymmetry, redistributing the property rights may improve work incentives but lead to an inefficient choice of entrepreneurial risk. We present a model in which reassignment of property rights does not affect factor prices and we show that there exist egalitarian asset redistributions that enhance allocative efficiency. The scope for such redistributions can be broadened by offering fair insurance protecting the independent entrepreneur against risk unassociated with the production process and against production uncertainties that are unrelated to the quality of their individual decisions. The market will generally supply insurance of this type suboptimally.
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 University of Massachusetts Amherst, Department of Economics in its series UMASS Amherst Economics Working Papers with number 2000-03.
Date of creation: 15 Mar 2000
Date of revision:
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.:
- Oded Galor & Joseph Zeira, 2013.
"Income Distribution and Macroeconomics,"
2013-12, Brown University, Department of Economics.
- Laffont, Jean-Jacques & Matoussi, Mohamed Salah., 1988.
"Moral Hazard, Financial Constraints and Sharecropping in El Oulja,"
667, California Institute of Technology, Division of the Humanities and Social Sciences.
- Laffont, Jean-Jacques & Matoussi, Mohamed Salah, 1995. "Moral Hazard, Financial Constraints and Sharecropping in El Oulja," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 381-99, July.
- Selden, Thomas M., 1997. "More on the economic efficiency of mixed public/private insurance," Journal of Public Economics, Elsevier, vol. 66(3), pages 517-523, December.
- Patrick Legros & Andrew Newman, 1996.
"Wealth effects, distribution, and the theory of organization,"
ULB Institutional Repository
2013/7036, ULB -- Universite Libre de Bruxelles.
- Legros, Patrick & Newman, Andrew F., 1996. "Wealth Effects, Distribution, and the Theory of Organization," Journal of Economic Theory, Elsevier, vol. 70(2), pages 312-341, August.
- Blomqvist, Ake & Johansson, Per-Olov, 1996.
"Economic Efficiency and Mixed Public/Private Insurance,"
Working Paper Series in Economics and Finance
110, Stockholm School of Economics.
- Blomqvist, A. & Johansson, P-O., 1997. "Economic efficiency and mixed public/private insurance," Journal of Public Economics, Elsevier, vol. 66(3), pages 505-516, December.
- Dilip Mookherjee, 1995. "Informational Rents and Property Rights in Land," Boston University - Institute for Economic Development 55, Boston University, Institute for Economic Development.
- Abhijit Banerjee & Andrew F. Newman, 1989.
"Risk-Bearing and the Theory of Income Distribution,"
877, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Banerjee, Abhijit V & Newman, Andrew F, 1991. "Risk-Bearing and the Theory of Income Distribution," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 211-35, April.
- Kanbur, S M, 1979. "Of Risk Taking and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 769-97, August.
- Sinn, Hans-Werner, 1990. " Expected Utility, mu-sigma Preferences, and Linear Distribution Classes: A Further Result," Journal of Risk and Uncertainty, Springer, vol. 3(3), pages 277-81, September.
- Case, A. & Deaton, A., 1996.
"Large Cash Transfers to the Elderly in South Africa,"
176, Princeton, Woodrow Wilson School - Development Studies.
- Case, Anne & Deaton, Angus, 1998. "Large Cash Transfers to the Elderly in South Africa," Economic Journal, Royal Economic Society, vol. 108(450), pages 1330-61, September.
- Anne Case & Angus Deaton, 1996. "Large Cash Transfers to the Elderly in South Africa," NBER Working Papers 5572, National Bureau of Economic Research, Inc.
- Black, Jane & de Meza, David, 1997. "Everyone may benefit from subsidising entry to risky occupations," Journal of Public Economics, Elsevier, vol. 66(3), pages 409-424, December.
- Samuel Bowles, 2000. "Globalization and Redistribution: Feasible Egalitarianism in a Competitive World," Working Papers wp34, Political Economy Research Institute, University of Massachusetts at Amherst.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lisa Saunders).
If references are entirely missing, you can add them using this form.