Incentives and Government Relief for Risk

13 Pages Posted: 14 Apr 2007 Last revised: 21 Sep 2010

See all articles by Louis Kaplow

Louis Kaplow

Harvard Law School; National Bureau of Economic Research (NBER)

Date Written: June 1989

Abstract

Government relief is offered for a wide range of risks - - natural disaster, economic dislocation, sickness and injury. This paper explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient, even when its level is less than the private insurance coverage that individuals would otherwise have purchased and even when private insurance coverage is incomplete due to problems of moral hazard.

Suggested Citation

Kaplow, Louis, Incentives and Government Relief for Risk (June 1989). NBER Working Paper No. w3007. Available at SSRN: https://ssrn.com/abstract=979729

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