Political Sustainability and the Design of Social Insurance
Posted: 1 Aug 2001
This paper examines how the issue of political support affects the design of social insurance. It distinguishes between redistributive character and size of social protection. Three main results emerge. First, it may be appropriate to adopt a system which is less redistributive than otherwise optimal, in order to ensure political support for an adequate level of coverage in the second (voting) stage. Second, supplementary private insurance may increase the welfare of the poor, even if it is effectively bought only by the rich. Third, the case for prohibiting (supplementary) private insurance may become stronger when the efficiency of private insurance markets increases.
Keywords: Social insurance, Political support
JEL Classification: H23, D72, H50
Suggested Citation: Suggested Citation