IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

Public Self-Insurance and the Samaritan‘s Dilemma in a Federation

  • Tim Lohse
  • Julio R. Robledo

    ()

Motivated by recent disasters, this paper analyzes the risk sharing aspect in a federation. The regions can be hit by a shock leading to losses that occur with an exogenous probability and in a stochastically independent way. The regions can spend effort on self-insurance to reduce the size of the loss. Being part of a federation has two countervailing welfare effects. On the one hand, there is the well known welfare increase due to risk pooling. On the other hand, the self-insurance effort is a public good, because all regions benefit from the reduction of the loss. There exists a Samaritan’s dilemma kind of effect whereby regions reduce their self-insurance effort potentially leading to an overall welfare decrease. The central government can solve this dilemma by committing to fixed rather than to variable transfers. This induces regions that behave noncooperatively to choose the effi cient level of self-insurance effort.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.rwi-essen.de/files/REP_12_330.pdf
Download Restriction: no

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0330.

as
in new window

Length: 28 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:rwi:repape:0330
Contact details of provider: Postal:
Hohenzollernstraße 1-3, 45128 Essen

Phone: (0201)8149-0
Fax: (0201)8149-200
Web page: http://www.rwi-essen.de/
Email:


More information through EDIRC

Order Information: Web: http://www.rwi-essen.de/publikationen/

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rwi:repape:0330. 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: (Sabine Weiler)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.