NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

A General Rationale for a Governmental Role in the Relief of Large Risks

Steven Shavell

NBER Working Paper No. 20192
Issued in June 2014
NBER Program(s):   LE   PE

The government often provides relief against large risks, such as disasters. A simple, general rationale for this role of government is considered here that applies even when private contracting to share risks is not subject to market imperfections. Specifically, the optimal private sharing of risks will not result in complete coverage against them when they are sufficiently large. Hence, when such risks eventuate, the marginal utility to individuals of governmental relief may exceed the marginal value of public goods. Consequently, social welfare may be raised if the government reduces public goods expenditures and directs these freed resources toward individuals who have suffered losses.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

A data appendix is available at http://www.nber.org/data-appendix/w20192

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20192

Users who downloaded this paper also downloaded these:
Crepon, Devoto, Duflo, and Pariente w20144 Estimating the Impact of Microcredit on Those Who Take It Up: Evidence from a Randomized Experiment in Morocco
Shavell w18418 A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation
La Porta and Shleifer w20205 Informality and Development
Bianchi and Ilut w20194 Monetary/Fiscal Policy Mix and Agents' Beliefs
Chiappori and Meghir w20191 Intrahousehold Inequality
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us