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We develop a theoretical model of input use by agricultural producers who purchase crop insurance, and thus may engage in moral hazard. Through simulations, our findings…
We develop a theoretical model of input use by agricultural producers who purchase crop insurance, and thus may engage in moral hazard. Through simulations, our findings show a combination of partial insurance coverage and partial monitoring of inputs may reduce substantially the problems associated with moral hazard. The minimum level of input use that must be required by regulation is determined to be substantially lower than the optimal or actual input level chosen by producers. Because the use of inputs for crop production occurs in many stages over the pre‐planting, planting, and growing seasons, only a minimal input requirement is needed. Thus, the cost of implementing such a regulation can be kept much lower than would be the case for a regulation of complete monitoring of input usage.
Asymmetric information in the form of moral hazard and adverse selection can result in sizable program costs for government‐provided crop insurance plans. We present a…
Asymmetric information in the form of moral hazard and adverse selection can result in sizable program costs for government‐provided crop insurance plans. We present a methodology and illustrative simulations to show how these two types of information problems interact in a way to create program costs for the providers of crop insurance. Our methodology allows us to ascertain the relative contributions to program costs of these two sources of asymmetric information. The exercise is useful in pointing out directions for future study seeking ways to improve the design of crop insurance plans.
We adopt a standard distributional impact methodology, based on Atkinson's cost of inequality approach, to estimate the degree of implicit redistribution created through…
We adopt a standard distributional impact methodology, based on Atkinson's cost of inequality approach, to estimate the degree of implicit redistribution created through public funding of health insurance in Canada. The first stage of the exercise is to determine the public health insurance benefits received by families of various age and composition and to add these to measured after-tax incomes. In our base case, which uses the Atkinson Mean Logarithmic Deviation as inequality index, we find that accounting for public health insurance benefits implies a reduction in inequality equivalent to 2.4% of per capita income. We then model the implications of moving to a hypothetical fully privatized system while proportionately refunding to individuals the tax revenues saved in doing so. This would give rise to a further 2.4% equivalent per capita income reduction resulting from increased inequality in the distribution of after-tax income. Thus, for this scenario, moving from public financing of health insurance in Canada to a fully privatized system implies an overall increase in inequality equivalent to a loss of 4.8% of per capita income. This corresponds to an increase of about 25% in existing inequality. Not surprisingly, the impact of publicly financed health insurance in reducing inequality is strongest for the elderly.
The distributional impacts of replacing an income tax that has graduated marginal rates by a flat tax are complex. Typically the flat tax rate will be less than the top…
The distributional impacts of replacing an income tax that has graduated marginal rates by a flat tax are complex. Typically the flat tax rate will be less than the top marginal rate under the pre-existing tax, leading to gains for the wealthiest. On the other hand, real-world proposals generally combine this with increases in personal exemptions that benefit some of the lowest income taxpayers. The result is that flat tax proposals usually redistribute from the middle to the extremes.
Insurance and asset holdings are modeled as the jointly determined outcomes of a constrained optimization problem. Consequently, (1) full coverage may be optimal despite…
Insurance and asset holdings are modeled as the jointly determined outcomes of a constrained optimization problem. Consequently, (1) full coverage may be optimal despite limited premium loading, (2) insurance is normal if insurable assets are normal, (3) insurance cannot be a Giffen good, and (4) insurance is a complement to price‐elastic assets.
For equity, societies may wish to eliminate certain forms or manifestations of inequality. Horizontal equity and vertical equity in the income tax are topics which have interested me for some years. Although any shortfall from each of these objectives can be measured in terms of unwanted inequalities, equity per se is a different concept from equality. Equity relates to fairness, justice and other societal norms which give expression to the best aspirations of our collective social conscience. For example, equal access to health care for those in equal need is an accepted norm for horizontal equity in the health field. Vertical equity in this context means treating appropriately differently those who have different needs. When offered the opportunity to be Guest Editor of this volume of Research on Economic Inequality, I decided to define the focus simply as “equity”, without placing any further restriction on topics. The papers which were ultimately included in this volume are the ones, from among those offered, which survived a rigorous refereeing process. Each has its own “take” on the concept of equity, and its link with equality. I hope that you, the reader, will gain from reading all of these contributions and pondering their significance.
The purpose of this paper is to trace a 40‐year research journey to identify organizational properties that foster the achievement of all students, regardless of…
The purpose of this paper is to trace a 40‐year research journey to identify organizational properties that foster the achievement of all students, regardless of socio‐economic status (SES).
The author describes a search for school properties that have an impact on the cognitive and social‐emotional development of faculty and students, with special emphasis on academic achievement.
Three characteristics of schools were identified that make a positive difference for student achievement controlling for the SES: collective efficacy, collective trust in parents and students, and academic emphasis of the school. Further these three measures are elements of a latent construct, academic emphasis of school, which is a powerful predictor of student achievement regardless of SES.
The paper identifies school variables that are often as important, or more important, than SES in explaining academic achievement, and a new model is created to explain how academic optimism influences student achievement.