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| Author: | Boadway, R. (et al.) |
| Title: | Social insurance and redistribution with moral hazard and adverse selection |
| Journal: | Scandinavian Journal of Economics
2006 : VOL. 108:2, p. 279-298 |
| Index terms: | social security insurance income tax adverse selection moral hazard risk management models |
| Language: | eng |
| Abstract: | It has been shown by Rochet (1991) that with distortionary income taxes, social insurance (hereafter as: soc-ins.) is a desirable redistributive device with negatively correlated risk and ability. This paper re-examines this finding when ex-post moral hazard (as: m-haz.) and adverse selection (as: a-sel.) are included, and under different informational assumptions. Individuals can take actions influencing the size of the loss in the event of accident (or illness). Soc-ins. can be supplemented by private insurance (as: p-ins.), but p-ins. markets are affected by both a-sel. and m-haz. It is studied how equity and efficiency considerations should be traded off in choosing the optimal coverage of soc-ins. with those features introduced. The case for soc-ins. is strongest when the government is well informed about household productivity. |
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