Occupational risks, social insurance and investments in education
A link between social insurance and education policy is explored. Due to moral hazard full insurance against disability is not feasible. When high- and low-risk individuals can be identified second-best social insurance system entails cross-subsidies from the low-risk group to the high-risk group. Implementation of this second-best insurance however distorts the human capital investment decisions when education qualifies for a low risk job. Therefore, the second-best social insurance together with an education subsidy is a welfare improving policy. An education policy also has the role of establishing dynamic consistency of the government's policy.
Volume (Year): 13 (2000)
Issue (Month): 3 ()
|Note:||Received: 16 October 1998/Accepted: 8 September 1999|
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