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Increases in skewness and insurance

Author

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  • Thomas Eichner

    (University of Hagen)

Abstract

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.

Suggested Citation

  • Thomas Eichner, 2013. "Increases in skewness and insurance," Economics Bulletin, AccessEcon, vol. 33(4), pages 2672-2681.
    • Handle: RePEc:ebl:ecbull:eb-13-00702
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    self-insurance; social insurance; skewness; skewness affinity;
    All these keywords.

    JEL classification:

    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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