TOO FEW RISK TAKERS

Paper number: 95/04

Year: 1995

Paper Category: Discussion Paper

Authors

J.M.Black

David de Meza

University of Exeter (UK)

Abstract

This paper shows that costly state verification creates a bias against risky activities in the policy relevant sense that everyone may gain if entry to them is subsidised. The result holds even in the presence of private insurance. In fact, it may be preferable to ban private insurance and rely on subsidies to risky occupations.

JEL numbers:D52, D80.
Keywords: commodity tax reform, tax harmonisation.

Comments by John Black, George Bulkley, Bob Gould, Mike Hoy, Ben Lockwood, Gareth Myles, Clive Southey and seminar participants at Keele and Warwick are much appreciated.