Incentives and Government Relief for Risk
Government relief is offered for a wide range of risks - - natural disaster, economic dislocation, sickness and injury. This paper explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient, even when its level is less than the private insurance coverage that individuals would otherwise have purchased and even when private insurance coverage is incomplete due to problems of moral hazard.
|Date of creation:||Jun 1989|
|Date of revision:|
|Publication status:||published as Journal of Risk and Uncertainty, Vol. 4, No. 2, pp. 167-175, (1991).|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Bengt Holmstrom, 1997.
"Moral Hazard and Observability,"
Levine's Working Paper Archive
1205, David K. Levine.
- Sanford Grossman & Oliver Hart, .
"An Analysis of the Principal-Agent Problem,"
Rodney L. White Center for Financial Research Working Papers
15-80, Wharton School Rodney L. White Center for Financial Research.
- Richard Arnott & Joseph Stiglitz, 1982.
"Moral Hazard and Optimal Commodity Taxation,"
500, Queen's University, Department of Economics.
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