A General Rationale for a Governmental Role in the Relief of Large Risks

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A General Rationale for a Governmental Role in the Relief of Large Risks

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Title: A General Rationale for a Governmental Role in the Relief of Large Risks
Author: Shavell, Steven
Citation: Steven Shavell, A General Rationale for a Governmental Role in the Relief of Large Risks (Harvard John M. Olin Center for Law, Economics, and Business, Discussion Paper No. 768, May 2014).
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Abstract: The government often provides relief against large risks, such as disasters. A simple, general rationale for this role of government is considered here that applies even when private contracting to share risks is not subject to market imperfections. Specifically, the optimal private sharing of large risks will not result in complete coverage against them. Hence, when such risks eventuate, the marginal utility to individuals of government relief may exceed the marginal value of public goods. Consequently, social welfare may be raised if the government reduces public goods expenditures and directs these freed resources toward individuals who have suffered losses.
Published Version: http://www.law.harvard.edu/programs/olin_center/papers/pdf/Shavell_768.pdf
Other Sources: http://www.nber.org/papers/w20192.pdf
http://dx.doi.org/10.1007/s11166-014-9203-2
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:16883007
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