IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Discretion Rather than Simple Rules: the Case of Social Protection

Listed author(s):
  • Alvaro Forteza

    ()

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

  • Cecilia Noboa

    ()

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

We present a simple model of a benevolent government that provides insurance to risk averse individuals. As in macroeconomics, commitment to fully contingent rules is better than discretion, but when the government can only commit to simple rules, discretion may be the best available option. The model provides a simple albeit precise characterization of discretion and commitment to a simple rule in the context of social protection, showing when and why discretion may be better than commitment. We argue that the forces highlighted in our model can provide a rationale for several highly distortive policies often observed in the real world in weak institutional environments.

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://cienciassociales.edu.uy/departamentodeeconomia/wp-content/uploads/sites/2/2014/11/0814.pdf
Download Restriction: no

Paper provided by Department of Economics - dECON in its series Documentos de Trabajo (working papers) with number 0814.

as
in new window

Length: 30 pages
Date of creation: Aug 2014
Handle: RePEc:ude:wpaper:0814
Contact details of provider: Postal:
Constituyente 1502, 6to piso, CP 11200, Montevideo

Phone: (598) 2410-6449
Fax: (598) 2410-6450
Web page: http://cienciassociales.edu.uy/departamentodeeconomia/
Email:


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.:

as
in new window


  1. Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-1182, December.
  2. Daron Acemoglu & Matthew O. Jackson, 2017. "Social Norms and the Enforcement of Laws," Journal of the European Economic Association, European Economic Association, vol. 15(2), pages 245-295.
  3. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, December.
  4. Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-1428, November.
  5. Rodrigo Ceni, 2014. "Informality and government enforcement in Latin America," Documentos de Trabajo (working papers) 14-21, Instituto de Economía - IECON.
  6. Álvaro Forteza, 1999. "Government discretionary transfers and overinsurance," Estudios de Economia, University of Chile, Department of Economics, vol. 26(1 Year 19), pages 27-44, June.
  7. Loayza, Norman V. & Rigolini, Jamele, 2011. "Informal Employment: Safety Net or Growth Engine?," World Development, Elsevier, vol. 39(9), pages 1503-1515, September.
  8. Guillermo E. Perry & William F. Maloney & Omar S. Arias & Pablo Fajnzylber & Andrew D. Mason & Jaime Saavedra-Chanduvi, 2007. "Informality : Exit and Exclusion," World Bank Publications, The World Bank, number 6730.
  9. Rofman, Rafael & Oliveri, Maria Laura, 2012. "Pension coverage in Latin America : trends and determinants," Social Protection and Labor Policy and Technical Notes 70926, The World Bank.
  10. Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
Full references (including those not matched with items on IDEAS)

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:ude:wpaper:0814. 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: (Andrea Doneschi)

or (Héctor Pastori)

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.