Protecting the Vulnerable: The Trade-Off between Risk Reduction and Public Insurance
29 Pages Posted: 12 Jul 2004
Date Written: June 2004
Abstract
In a risky world, should governments provide public goods that reduce risk or compensate the victims of bad outcomes? We examine the allocation of public expenditures in the context of a risky environment between the provision of a public good with risk-reducing characteristics, and the expansion of a tax-financed public insurance system. We allow for the existence of a private insurance market as well, and therefore for the possibility of crowding out by a public insurance scheme. Nevertheless, we find there is scope for substantial spending on insurance, especially as risk aversion and the size of the total budget grows.
Keywords: Social insurance, risk reduction, public expenditure allocation
JEL Classification: H41, H42, I38
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
The Changing Role of the State in the Economy: A Historical Perspective
By Vito Tanzi