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Thomas Eichner
''Increases in skewness and insurance''
( 2013, Vol. 33 No.4 )
The present paper analyzes how the welfare state, i.e., social insurance that works through redistributive taxation, should respond to increases in the skewness of the risk distribution. Income risks can be hedged either by individual self-insurance or by social insurance. It is shown that skewness-affine agents reduce both self-insurance and social insurance in response to an increase in income skewness. Thus countries with a more right-skewed income distribution have less redistribution.
Keywords: self-insurance, social insurance, skewness, skewness affinity
JEL: H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
D8 - Information, Knowledge, and Uncertainty: General
Manuscript Received : Oct 10 2013 Manuscript Accepted : Oct 15 2013

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