Does Social Capital reduce moral hazard? A network model for non-life insurance demand
AbstractWe study is the effect of moral hazard involved in non market contracts on the demand for marketed contracts. We extend Arnott and Stiglitz model on the coexistence of market and non-market insurance contracts to allow for the presence of Social Capital as a determinant of the severity of moral hazard in informal contracts. We provide a rigorous definition of Social Network and Social Capital by means of an equilibrium concept typical of the Network literature. Such a formal approach gives us a clear guidance for measuring Social Capital and validate the model on empirical data. The model is estimated on a panel dataset, supporting our claim that Social Capital increases the demand for non-life insurance. We test for the presence of spatial correlation, and conclude that the spatial structure of demand for non-life insurance contracts is completely determined by the spatial distribution of Social Capital.
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Bibliographic InfoPaper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2006_59.
Date of creation: 2006
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Postal: Cannaregio, S. Giobbe no 873 , 30121 Venezia
Web page: http://www.unive.it/dip.economia
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Insurance; Social Capital; Network stability; Spatial Panel data model;
Other versions of this item:
- Giovanni Millo & Giacomo Pasini, 2010. "Does Social Capital Reduce Moral Hazard? A Network Model for Non-Life Insurance Demand," Fiscal Studies, Institute for Fiscal Studies, vol. 31(3), pages 341-372, 09.
- C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
- D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Social and Economic Stratification
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- Nordström Skans, Oskar & Kramarz, Francis, 2011.
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