Economic Efficiency and Mixed Public/Private Insurance

Stockholm School of Economics WPS 110

Posted: 5 May 1998

See all articles by Åke G. Blomqvist

Åke G. Blomqvist

National University of Singapore (NUS) - Department of Economics

Per-Olov Johansson

Stockholm School of Economics

Date Written: March 1996

Abstract

In this paper we discuss the efficiency properties of insurance markets where supplementary private insurance is allowed to exist together with a compulsory government insurance plan. Our main conclusion, which is contrary to both those of Besley (1989) and Selden (1993), is that in a simple model focusing on the moral hazard problem alone, a mixed system will generally be strictly less efficient than a purely private (competitive) system. We also show that there is a flaw in Selden's (1993) main proposition, which at least in part invalidates his result on the welfare properties of systems of mixed government/private insurance.

JEL Classification: I18, H42

Suggested Citation

Blomqvist, Åke G. and Johansson, Per-Olov, Economic Efficiency and Mixed Public/Private Insurance (March 1996 ). Stockholm School of Economics WPS 110. Available at SSRN: https://ssrn.com/abstract=4073

Åke G. Blomqvist

National University of Singapore (NUS) - Department of Economics ( email )

1 Arts Link, AS2 #06-02
Singapore 117570, Singapore 119077
Singapore

Per-Olov Johansson (Contact Author)

Stockholm School of Economics ( email )

P.O. Box 6501
Stockholm
SWEDEN
+46 8 736 92 82 (Phone)
+46 8 30 21 15 (Fax)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
665
PlumX Metrics