Insurance design in the presence of safety nets

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

Safety net assistance and insurance exist to manage risk and improve welfare. This shared goal may lead to crowding out. In a new approach, this paper analyzes the interaction of assistance with two dimensions of insurance design: level of coverage and types of risks covered. In a society of risk averse vulnerable individuals and risk neutral assistance providers, Pareto improvements in welfare are achieved through incompleteness in the types of risks covered. The results imply that safety nets promote demand for and the emergence of incomplete insurance. These results have a wide application to insurance markets where safety nets are available, including health care, disaster aid and social welfare.

Original languageEnglish
Pages (from-to)47-58
Number of pages12
JournalJournal of Public Economics
Volume149
DOIs
Publication statusPublished - 1 May 2017
Externally publishedYes

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Insurance
Safety net
Disaster
Healthcare
Crowding out
Incompleteness
Risk-averse
Insurance market
Interaction
Social welfare
Pareto improvement

Cite this

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title = "Insurance design in the presence of safety nets",
abstract = "Safety net assistance and insurance exist to manage risk and improve welfare. This shared goal may lead to crowding out. In a new approach, this paper analyzes the interaction of assistance with two dimensions of insurance design: level of coverage and types of risks covered. In a society of risk averse vulnerable individuals and risk neutral assistance providers, Pareto improvements in welfare are achieved through incompleteness in the types of risks covered. The results imply that safety nets promote demand for and the emergence of incomplete insurance. These results have a wide application to insurance markets where safety nets are available, including health care, disaster aid and social welfare.",
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Insurance design in the presence of safety nets. / Teh, Tse Ling.

In: Journal of Public Economics, Vol. 149, 01.05.2017, p. 47-58.

Research output: Contribution to journalArticleResearchpeer-review

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