We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Protecting the Vulnerable: the Tradeoff between Risk Reduction and Public Insurance.
- Authors
Devarajan, Shantayanan; Jack, William
- Abstract
In a risky world should governments provide public goods that reduce risk or compensate the victims of bad outcomes through social insurance? This article examines a basic question in designing social protection policies: how should a government allocate a fixed budget between these two activities? In the presence of income and risk heterogeneities a simple public insurance scheme that pays a fixed benefit to all households that suffer a negative shock is an effective redistributional instrument of public policy. This is true even when a well functioning private insurance market exists, and so the role of public insurance is not to correct a market failure. In fact, the existence of a private insurance market means that the public system has desirable targeting properties--all but the poor and high-risk take up private insurance. The provision of public goods that reduce risk for all should therefore be complemented with public insurance that (automatically) benefits those who are especially vulnerable.
- Subjects
PUBLIC goods; RISK (Insurance); HOUSEHOLDS; WELFARE economics; SOCIAL security; GOVERNMENT insurance; SOCIAL legislation; RISK; RISK management in business; RISK aversion
- Publication
World Bank Economic Review, 2007, Vol 21, Issue 1, p73
- ISSN
0258-6770
- Publication type
Article
- DOI
10.1093/wber/lhl007