Government Relief for Risk Associated with Government Action
A significant source of risk arises from uncertainty concerning future government policy. Government action--tax reform, deregulation, judicial decisions, budgetary shifts--produces gains and losses for those who invested under preexisting rules. The effects of government relief--compensation, grandfathering, phase-ins--on ex ante incentives and risk bearing are examined using a model in which private insurance is available. It is demonstrated that government relief is inefficient, even when private insurance is subject to moral hazard, because relief shields individuals from some of the effects of their actions. Copyright 1992 by The editors of the Scandinavian Journal of Economics.
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Volume (Year): 94 (1992)
Issue (Month): 4 ()
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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.:
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