Increases in skewness and insurance
The present paper analyzes how the welfare state, i.e., social insurance that works through redistributive taxation, should respond to increases in the skewness of the risk distribution. Income risks can be hedged either by individual self-insurance or by social insurance. It is shown that skewness-affine agents reduce both self-insurance and social insurance in response to an increase in income skewness. Thus countries with a more right-skewed income distribution have less redistribution.
Volume (Year): 33 (2013)
Issue (Month): 4 ()
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- Sinn, Hans-Werner, 1995.
" A Theory of the Welfare State,"
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