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.

download in pdf format
   (188 K)

email paper

Supplementary materials for this paper:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20192

Published: Steven Shavell, 2014. "A general rationale for a governmental role in the relief of large risks," Journal of Risk and Uncertainty, vol 49(3), pages 213-234.

Users who downloaded this paper also downloaded* these:
Shavell w18418 A Fundamental Enforcement Cost Advantage of the Negligence Rule over Regulation
Polinsky and Shavell w18594 Costly Litigation and Optimal Damages
Shavell w19879 Risk Aversion and the Desirability of Attenuated Legal Change
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 w20747 A Simple Model of Optimal Deterrence and Incapacitation
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us