Public versus private insurance: a political economy argument
This paper analyzes the political support for a public insurance in the presence of a private insurance alternative. The public insurance is compulsory and offers a uniform insurance policy. The private insurance is voluntary and can offer different insurance policies to different individual risks. We show that adverse selection on the private insurance market can lead a majority of individuals to prefer public insurance over private insurance, even if the median risk is below theaverage risk (so that the median ends upsubsidizing high-risk individuals). We also show that more risk aversion always leads to a greater political support for public insurance and that a mixture of public and private insurance is politically non sustainable. Lastly, we demonstrate how progressively more powerful information technology may help the private insurance market to mitigate the adverse selection problem and reduce the demand for public insurance threatening its political sustainability.
|Date of creation:||01 Dec 2000|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Epple, Dennis & Romano, Richard E, 1996. "Public Provision of Private Goods," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 57-84, February.
- Coronado Julia Lynn & Fullerton Don & Glass Thomas, 2011.
"The Progressivity of Social Security,"
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 11(1), pages 1-45, November.
- Julia Lynn Coronado & Don Fullerton & Thomas Glass, 2000. "The Progressivity of Social Security," NBER Working Papers 7520, National Bureau of Economic Research, Inc.
- Hindriks, Jean & Myles, Gareth D., 2013. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262018691, July.
- Jean Hindriks & Gareth D. Myles, 2006. "Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262083442, July.
- Karni, Edi & Zilcha, Itzhak, 1986. "Welfare and comparative statics implications of fair social security : A steady-state analysis," Journal of Public Economics, Elsevier, vol. 30(3), pages 341-357, August.
- Helmuth Cremer & Pierre Pestieau, 1996. "Redistributive taxation and social insurance," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 281-295, July.
- Cremer, H. & Pestieau, P., "undated". "Redistributive taxation and social insurance," CORE Discussion Papers RP 1235, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- CREMER, Helmuth & PESTIEAU, Pierre, 1995. "Redistributive Taxation and Social Insurance," CORE Discussion Papers 1995054, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Miguel Gouveia, 1997. "Majority rule and the public provision of a private good," Public Choice, Springer, vol. 93(3), pages 221-244, December.
- Gouveia, Miguel, 1997. "Majority Rule and the Public Provision of a Private Good," Public Choice, Springer, vol. 93(3-4), pages 221-244, December.
- Eckstein, Zvi & Eichenbaum, Martin & Peled, Dan, 1985. "Uncertain lifetimes and the welfare enhancing properties of annuity markets and social security," Journal of Public Economics, Elsevier, vol. 26(3), pages 303-326, April.
- David Miles & Allan Timmermann, 1999. "Risk sharing and transition costs in the reform of pension systems in Europe," Economic Policy, CEPR;CES;MSH, vol. 14(29), pages 251-286, October.
- Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-1365, November.
- Jean-Charles Rochet, 1991. "Incentives, Redistribution and Social Insurance," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 16(2), pages 143-165, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2000058. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.