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Louis Kaplow
NBER Working Paper No. 3007 (Also Reprint No. r1587)*
Issued in August 1991
NBER Program(s): PE
---- Abstract -----
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.
*Published: Journal of Risk and Uncertainty, Vol. 4, No. 2, pp. 167-175, (1991).
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