Insurance design in the presence of safety nets

Tse-Ling Teh

doi:10.1016/j.jpubeco.2017.03.001

Insurance design in the presence of safety nets

Tse-Ling Teh^*

^*Corresponding author for this work

Microeconomics & Public Economics

Research output: Contribution to journal › Article › Academic › peer-review

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. (C) 2017 Published by Elsevier B.V.

Original language	English
Pages (from-to)	47-58
Number of pages	12
Journal	Journal of Public Economics
Volume	149
DOIs	https://doi.org/10.1016/j.jpubeco.2017.03.001
Publication status	Published - May 2017

Keywords

PRIVATE HEALTH-INSURANCE
MORAL HAZARD
RISK
INCENTIVES
DISASTERS
MARKETS
DILEMMA
RELIEF
CHOICE
POLICY

Access to Document

10.1016/j.jpubeco.2017.03.001Licence: Unspecified

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. (C) 2017 Published by Elsevier B.V.",

keywords = "PRIVATE HEALTH-INSURANCE, MORAL HAZARD, RISK, INCENTIVES, DISASTERS, MARKETS, DILEMMA, RELIEF, CHOICE, POLICY",

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year = "2017",

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doi = "10.1016/j.jpubeco.2017.03.001",

language = "English",

volume = "149",

pages = "47--58",

journal = "Journal of Public Economics",

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T1 - Insurance design in the presence of safety nets

AU - Teh, Tse-Ling

N1 - no data used

PY - 2017/5

Y1 - 2017/5

N2 - 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. (C) 2017 Published by Elsevier B.V.

AB - 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. (C) 2017 Published by Elsevier B.V.

KW - PRIVATE HEALTH-INSURANCE

KW - MORAL HAZARD

KW - RISK

KW - INCENTIVES

KW - DISASTERS

KW - MARKETS

KW - DILEMMA

KW - RELIEF

KW - CHOICE

KW - POLICY

U2 - 10.1016/j.jpubeco.2017.03.001

DO - 10.1016/j.jpubeco.2017.03.001

M3 - Article

SN - 0047-2727

VL - 149

SP - 47

EP - 58

JO - Journal of Public Economics

JF - Journal of Public Economics

ER -