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Title:Self-Insurance and Self-Protection as Public Goods PDF Logo
Authors:Schmidt, Ulrich
Robledo, Julio R.
Lohse, Tim
Issue Date:2007
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2007,16
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 Samuelson?s 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.
Subjects:Self-insurance
self-protection
efficient provision of public goods
private provision of public goods
market insurance
JEL:G22
H41
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
Economics Working Papers, Department of Economics, CAU Kiel

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