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The Supply of Social Insurance

  • Gonzalez, M.
  • Wen, W.
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    We propose a theory of the welfare state, in which social transfers are chosen by a governing group interacting with non-governing groups repeatedly. Social demands from the non-governing groups are credible because these groups have the ability to generate social conflict. In this context social insurance is supplied as an equilibrium response to income risks within a self-enforcing social contract. When we explore the implications of such a view of the social contract, we find four main determinants of the welfare state: the degree of aggregate income risk; the heterogeneity of group-specific income risks; the public administration’s ability to implement group-specific transfers; and the ability of the nongoverning groups to coordinate their social demands. We also analyze the link between public good provision and social insurance.

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    File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0772.pdf
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    Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0772.

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    Length: 24
    Date of creation: Dec 2007
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    Handle: RePEc:cam:camdae:0772
    Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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