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Social Insurance of Short Spell Sickness

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  • Sjur Didrik Flåm

Abstract

This paper looks at social insurance of short term absence from work. The chief concern is with efficiency properties of full coverage. That arrangement is reviewed and criticized here in light of received theory. A main point is that positive loading of the premium implies less than full coverage. Concerns with optimal risk sharing also pull in the same direction. Besides, full coverage creates problems with moral hazard. The possibilities to self-insure over time are emphasized.

Suggested Citation

  • Sjur Didrik Flåm, 2004. "Social Insurance of Short Spell Sickness," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 30, pages 79-90.
  • Handle: RePEc:noj:journl:v:30:y:2004:p:79-90
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    File URL: http://www.nopecjournal.org/NOPEC_2004_a07.pdf
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    References listed on IDEAS

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    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 1-35.
    2. Kimball, Miles S, 1990. "Precautionary Saving in the Small and in the Large," Econometrica, Econometric Society, vol. 58(1), pages 53-73, January.
    3. Doherty, Neil A & Schlesinger, Harris, 1983. "Optimal Insurance in Incomplete Markets," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 1045-1054, December.
    4. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics,in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
    5. Baton, Bernard & Lemaire, Jean, 1981. "The Core of a Reinsurance Market," ASTIN Bulletin: The Journal of the International Actuarial Association, Cambridge University Press, vol. 12(01), pages 57-71, June.
    6. Skinner, Jonathan, 1988. "Risky income, life cycle consumption, and precautionary savings," Journal of Monetary Economics, Elsevier, vol. 22(2), pages 237-255, September.
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    More about this item

    Keywords

    risk sharing; coinsurance; deductible; non-insurable risk; Pareto efficiency; mutual insurance; arbitrage; adverse selection; moral hazard;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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