Occupational Risks, Social Insurance and Investments in Education
Journal of Population Economics, Vol. 13, Issue 3, 2000
Posted: 13 Jul 2001
Abstract
A link between social insurance and education policy is explored. Due to moral hazard full insurance against disability is not feasible. When high- and low-risk individuals can be identified, second-best social insurance system entails cross-subsidies from the low-risk group to the high-risk group. Implementation of this second-best insurance, however, distorts the human capital investment decisions when education qualifies for a low risk job. Therefore, the second-best social insurance together with an education subsidy is a welfare improving policy. An education policy also has the role of establishing dynamic consistency of the government's policy.
Keywords: Disability pensions, time consistency, education policy
JEL Classification: H21, H42, I28
Suggested Citation: Suggested Citation