The political economy of moral hazard
Conventional theory explains moral hazard as a consequence of information asymmetries. The present paper proposes an alternative approach. We argue that information asymmetries are just one among several causes of moral hazard and that they entail negative consequences for third parties only accidentally. By contrast, moral hazard also results from government interventionism. And in this case negative consequences are systematic and do result even in the absence of information asymmetries.
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Volume (Year): 2006 (2006)
Issue (Month): 1 ()
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References listed on IDEAS
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CEI Working Paper Series
2000-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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- Mirrlees, James A, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Wiley Blackwell, vol. 38(114), pages 175-208, April.
- Arnott, Richard J & Stiglitz, Joseph E, 1985. "Labor Turnover, Wage Structures, and Moral Hazard: The Inefficiency of Competitive Markets," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 434-62, October.
- 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..
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