The Supply of Social Insurance
Gonzalez, Francisco M.
Cambridge Working Papers in Economics
Faculty of Economics
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Gonzalez, F. M. (2007). The Supply of Social Insurance. https://doi.org/10.17863/CAM.5148
We propose a theory of the welfare state, in which social transfers are chosen by a governing group interacting with non-governing groups repeatedly. Social demands from the non-governing groups are credible because these groups have the ability to generate social conflict. In this context social insurance is supplied as an equilibrium response to income risks within a self-enforcing social contract. When we explore the implications of such a view of the social contract, we find four main determinants of the welfare state: the degree of aggregate income risk; the heterogeneity of group-specific income risks; the public administration’s ability to implement group-specific transfers; and the ability of the non-governing groups to coordinate their social demands. We also analyze the link between public good provision and social insurance.
Insurance, Social Contract, Welfare State
This record's DOI: https://doi.org/10.17863/CAM.5148
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