Natural disaster insurance and the equity-efficiency trade-off
This paper investigates the role of private insurance in the prevention and mitigation of natural disasters. We characterize the equity-efficiency trade-off faced by the policymakers under imperfect information about individual prevention costs. It is shown that a competitive insurance market with actuarial ratemaking and compensatory tax-subsidy transfers is likely to dominate regulated uniform insurance pricing rules or state-funded assistance schemes. The model illustrates how targeted tax cuts on insurance contracts can improve the incentives to prevention, while compensating the individuales with high prevention costs. The paper also highlights the complementarity between individual incentives through tax cuts and collective incentives through grants to the local jurisdictions where risk management plans are enforced
|Date of creation:||2005|
|Date of revision:|
|Note:||View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00243028|
|Contact details of provider:|| Web page: https://hal.archives-ouvertes.fr/|
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.:
- Laure Latruffe & Pierre Picard, 2005.
"Assurance des catastrophes naturelles : faut-il choisir entre prévention et solidarité ?,"
Annals of Economics and Statistics,
GENES, issue 78, pages 33-56.
- L. Latruffe & P. Picard, 2002. "Assurance des catastrophes naturelles : faut-il choisir entre prévention et solidarité ?," THEMA Working Papers 2002-31, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
- Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
- Browne, Mark J & Hoyt, Robert E, 2000. "The Demand for Flood Insurance: Empirical Evidence," Journal of Risk and Uncertainty, Springer, vol. 20(3), pages 291-306, May.
- Kunreuther, Howard, 1996. "Mitigating Disaster Losses through Insurance," Journal of Risk and Uncertainty, Springer, vol. 12(2-3), pages 171-87, May.
- Lewis, Tracy & Nickerson, David, 1989. "Self-insurance against natural disasters," Journal of Environmental Economics and Management, Elsevier, vol. 16(3), pages 209-223, May.
When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:hal-00243028. 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: (CCSD)
If references are entirely missing, you can add them using this form.