NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Dysfunctional Non-Market Institutions and the Market

Richard J. Arnott, Joseph E. Stiglitz

NBER Working Paper No. 2666
Issued in July 1988
NBER Program(s):   IFM

There is a widespread belief that when significant market failure occurs, there are strong incentives for non-market institutions to develop which go at least part of the way to remedying the deficiency. We demonstrate that this functionalist position is not in general valid. In particular, we examine a situation where insurance is characterized by moral hazard. We show that when market insurance is provided, supplementary mutual assistance between family and friends (unobservable to market insurers) -- a form of non-market institution -- will occur and may be harmful. This example suggests that non-market institutions can arise spontaneously even though they are dysfunctional.

download in pdf format
   (177 K)

download in djvu format
   (110 K)

email paper

This paper is available as PDF (177 K) or DjVu (110 K) (Download viewer) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w2666

Published: American Economic Review, "Moral Hazard and Non-Market Institution: Dysfunctional Crowling Out or Peer Monitoring?" Volume 81, pp. 179-190 1991

Users who downloaded this paper also downloaded these:
Greenwald and Stiglitz w2160 Keynesian, New Keynesian, and New Classical Economics
Arnott and Stiglitz w2507 Randomization with Asymmetric Information
Arnott and Stiglitz w3642 Price Equilibrium, Efficiency, and Decentralizability in Insurance Markets
Arnott and Stiglitz w1154 Moral Hazard and Optimal Commodity Taxation
Arnott and Stiglitz w3316 The Welfare Economics of Moral Hazard
 
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