A Model of Income Insurance and Social Norms
A large literature on ex ante moral hazard in income insurance emphasizes that the individual can affect the probability of an income loss by choice of lifestyle and hence, the degree of risk-taking. The much smaller literature on moral hazard ex post mainly analyzes how a â€œmoral hazard constraintâ€ can make the individual abstain from fraud (â€œmimickingâ€ ). The present paper instead presents a model of moral hazard ex post without a moral hazard constraint; the individual's ability and willingness to work is represented by a continuous stochastic variable in the utility function, and the extent of moral hazard depends on the generosity of the insurance system. Our model is also well suited for analyzing social norms concerning work and benefit dependency.
|Date of creation:||14 Feb 2006|
|Contact details of provider:|| Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden|
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