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Mandated benefits, welfare, and heterogeneous firms

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  • Addison, John T.
  • Barrett, Charles Richard
  • Siebert, William Stanley

Abstract

The paper constructs an asymmetric information model to investigate the efficiency and equity cases for government mandated benefits. A mandate can improve workers? insurance, and may also redistribute in favor of more "deserving" workers. The risk is that it may also reduce output. The more diverse are free market contracts - separating the various worker types - the more likely it is that such output effects will on balance serve to reduce welfare. It is shown that adverse effects can be mitigated by restricting mandates to "large" firms. An alternative to a mandate is direct government provision. We demonstrate that direct government provision may be superior to mandates by virtue of preserving separations.

Suggested Citation

  • Addison, John T. & Barrett, Charles Richard & Siebert, William Stanley, 1998. "Mandated benefits, welfare, and heterogeneous firms," ZEW Discussion Papers 98-46, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5216
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    References listed on IDEAS

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    5. Alan Krueger, 1994. "Observations on Employment-Based Government Mandates, With Particular Reference to Health Insurance," Working Papers 702, Princeton University, Department of Economics, Industrial Relations Section..
    6. Alan B. Krueger, 1994. "Observations on Employment-Based Government Mandates, With Particular Reference to Health Insurance," Working Papers 702, Princeton University, Department of Economics, Industrial Relations Section..
    7. Aghion, Philippe & Hermalin, Benjamin, 1990. "Why Legal Restrictions on Private Contracts Can Enhance Efficiency," Department of Economics, Working Paper Series qt4j76f10g, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
    8. Christopher J. Ruhm, 1998. "The Economic Consequences of Parental Leave Mandates: Lessons from Europe," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 285-317.
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    10. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
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    12. Wilson, Charles, 1977. "A model of insurance markets with incomplete information," Journal of Economic Theory, Elsevier, vol. 16(2), pages 167-207, December.
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    Cited by:

    1. Milan Vodopivec, 2004. "Income Support for the Unemployed : Issues and Options," World Bank Publications - Books, The World Bank Group, number 14922.
    2. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection Discussion Papers and Notes 25529, The World Bank.

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