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%T Public self-insurance and the Samaritan's dilemma in a federation %A Lohse, Tim %A Robledo, Julio R. %P 25 %V SP II 2012-103 %D 2012 %K Selbstversicherung %~ WZB %X Motivated by recent disasters, this paper analyzes the risk sharing aspect in a federation. The regions can be hit by a shock leading to losses that occur with an exogenous probability and in a stochastically independent way. The regions can spend effort on selfinsurance to reduce the size of the loss. Being part of a federation has two countervailing-elfare effects. On the one hand, there is the well known welfare increase due to risk pooling. On the other hand, the self-insurance effort is a public good, because all regions benefit from the reduction of the loss. There exists a Samaritan's dilemma kind of effect whereby regions reduce their self-insurance effort potentially leading to an overall welfare decrease. The central government can solve this dilemma by committing to fixed rather than variable transfers. This induces regions that behave non-cooperatively to still choose the efficient level of self-insurance effort. (author's abstract) %C DEU %C Berlin %G en %9 Arbeitspapier %W GESIS - http://www.gesis.org %~ SSOAR - http://www.ssoar.info