Abstract
Individuals face uncertainty about their labour income, due to chronic and temporary medical conditions or to unemployment spells. The individual burden of these risks can be eased by social insurance. Income taxation and government transfer programmes, such as disability and unemployment insurance, are the most common forms of social insurance. The challenge in the design of social insurance programmes is the impossibility of fully distinguishing between low income by choice and low income by necessity. This article reviews leading theories of optimal social insurance under private information and points to possible directions of future research.
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume.
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Albanesi, S. (2008). Social Insurance. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_2213-1
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DOI: https://doi.org/10.1057/978-1-349-95121-5_2213-1
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Keywords
- Adverse selection
- Altruism
- Consumption inequality
- Consumption smoothing
- Continuation values
- Depreciation
- Disability insurance
- Euler equations
- Expected utility
- Human capital
- Immizeration
- Incentive compatibility
- Incentives
- Infinite horizons
- Lump-sum taxes
- Mirrlees, J.
- Moral hazard
- Observability
- Optimal taxation
- Principal and agent
- Private information
- Private insurance
- Progressive and regressive taxation
- Promised values
- Risk sharing
- Search models of unemployment
- Self-insurance
- Social insurance
- Taxation of capital income
- Taxation of income
- Training
- Unemployment insurance
- Welfare-to-work programmes