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Self-Insurance and Self-Protection as Public Goods

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Author Info
Schmidt, Ulrich
Robledo, Julio R.
Lohse, Tim

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Abstract

Many public goods like lighthouses and fire departments do not provide direct utility but act as insurance devices against shipwreck and destruction. They either diminish the size and/or the probability of the loss. We extend the public good model with this insurance aspect and generalize Samuelson?s efficient allocation rule when self-insurance and self-protection expenditures are pure public goods. Some comparative static results with respect to changes in income and risk behavior are derived. We analyze the interaction of private market insurance with the public good level, both for efficient provision and for private provision equilibria. The privately provided levels of self- insurance and self-protection decrease when market insurance is available, which suggests that the state should invest more in preventing not insurable risks like wars. Additionally, the state should focus on self-protection expenditures if those are better observable than private self-protection effort.

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Publisher Info
Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,16.

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Date of creation: 2007
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Handle: RePEc:zbw:cauewp:5682

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Web page: http://www.wiso.uni-kiel.de/econ/

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Related research
Keywords: Self-insurance; self-protection; efficient provision of public goods; private provision of public goods; market insurance;

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Find related papers by JEL classification:
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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References listed on IDEAS
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.:
  1. Dionne, G. & Eeckhoudt, L., 1984. "Self-Insurance, Self-Protection and Increased Risk Aversion," Cahiers de recherche 8424, Universite de Montreal, Departement de sciences economiques.
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  2. Gradstein, M. & Nitzan, S. & Slutsky, S., 1990. "Private Provision Of Public Goods Under Price Uncertainty," Papers 90-2, Florida - College of Business Administration.
  3. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug.. [Downloadable!] (restricted)
  4. Warr, Peter G., 1983. "The private provision of a public good is independent of the distribution of income," Economics Letters, Elsevier, vol. 13(2-3), pages 207-211. [Downloadable!] (restricted)
  5. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January. [Downloadable!] (restricted)
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  6. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February. [Downloadable!] (restricted)
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  7. Austen-Smith, David, 1980. "Individual contribution to public goods," Economics Letters, Elsevier, vol. 5(4), pages 359-361. [Downloadable!] (restricted)
  8. Wolfgang Buchholz & Wolfgang Peters, 2001. "The overprovision anomaly of private public good supply," Journal of Economics, Springer, vol. 74(1), pages 63-78, February. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Toshihiro Ihori & Martin McGuireb, 2008. "National Adversity: Managing Insurance and Protection," CIRJE F-Series CIRJE-F-554, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  2. Toshihiro Ihori & Martin McGuire, 2006. "Patterns of Non-exponential Growth of Macroeconomic Models: Two-parameter Poisson-Dirichlet Models," CIRJE F-Series CIRJE-F-450, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
  3. Traub, Stefan, 2006. "The Provision of Local Public Services in a Risky Environment: An Application to Crime," Economics Working Papers 2006,03, Christian-Albrechts-University of Kiel, Department of Economics. [Downloadable!]
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