NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Incentives and Government Relief for Risk

Louis Kaplow

NBER Working Paper No. 3007 (Also Reprint No. r1587)
Issued in June 1989
NBER Program(s):   PE

Government relief is offered for a wide range of risks - - natural disaster, economic dislocation, sickness and injury. This paper explores the effect of such relief on incentives and the allocation of risk in a model with private insurance. It is shown that government relief is inefficient, even when its level is less than the private insurance coverage that individuals would otherwise have purchased and even when private insurance coverage is incomplete due to problems of moral hazard.

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Document Object Identifier (DOI): 10.3386/w3007

Published: Journal of Risk and Uncertainty, Vol. 4, No. 2, pp. 167-175, (1991).

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