| By: |
Lohse, Tim;
Robledo, Julio R.;
Schmidt, Ulrich |
| Abstract: |
Many public goods like lighthouses and fire departments do not provide direct
utility but act as insurance devices against shipwreck and destruction. They
either diminish the size and/or the probability of the loss. We extend the
public good model with this insurance aspect and generalize
SamuelsonÃÂâÃÂÃÂÃÂÃÂs efficient allocation rule when
self-insurance and self-protection expenditures are pure public goods. Some
comparative static results with respect to changes in income and risk behavior
are derived. We analyze the interaction of private market insurance with the
public good level, both for efficient provision and for private provision
equilibria. The privately provided levels of self- insurance and
self-protection decrease when market insurance is available, which suggests
that the state should invest more in preventing not insurable risks like wars.
Additionally, the state should focus on self-protection expenditures if those
are better observable than private self-protection effort. |
| Keywords: |
Self-insurance, self-protection, efficient provision of public goods, private provision of public goods, market insurance |
| JEL: |
G22 H41 |
| Date: |
2007 |
| URL: |
https://d.repec.org/n?u=RePEc:zbw:cauewp:5682 |