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Social Insurance and the Public Budget

Author

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  • Andersen, Torben M
  • Dogonowski, Robert R

Abstract

Restraints on the public budget may limit the ability of the public sector to use financial markets for the diversification of shocks. This interferes with the role of the public budget as a buffer which may provide insurance by stabilizing income and thereby private consumption. We consider this insurance or stabilizing role of public budgets and show why pro-cyclical budgets and a progressive taxation system may be optimal even when tax distortions are taken into account. Balanced budget restrictions interfere with this insurance effect, and they do not necessarily imply that a lower level of public consumption is optimal. Copyright 2002 by The London School of Economics and Political Science

Suggested Citation

  • Andersen, Torben M & Dogonowski, Robert R, 2002. "Social Insurance and the Public Budget," Economica, London School of Economics and Political Science, vol. 69(275), pages 415-431, August.
    • Handle: RePEc:bla:econom:v:69:y:2002:i:275:p:415-31
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    Cited by:

    1. Andersen, Torben M. & Svarer, Michael, 2009. "Business cycle dependent unemployment insurance," Kiel Working Papers 1498, Kiel Institute for the World Economy (IfW Kiel).
    2. Torben Andersen, 2005. "Is there a Role for an Active Fiscal Stabilization Policy?," CESifo Working Paper Series 1447, CESifo.
    3. Andersen, Torben M. & Spange, Morten, 2006. "International interdependencies in fiscal stabilization policies," European Economic Review, Elsevier, vol. 50(5), pages 1169-1195, July.
    4. Torben Andersen, 2006. "Increasing Longevity and Social Security Reforms," CESifo Working Paper Series 1789, CESifo.
    5. Torben Andersen, 2005. "Social Security and Longevity," CESifo Working Paper Series 1577, CESifo.
    6. Torben M. Andersen, 2015. "Incentive And Insurance Effects Of Income Taxation," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 209-226, July.
    7. Torben M. Andersen & Robert R. Dogonowski, 2004. "What Should Optimal Income Taxes Smooth?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 6(3), pages 491-507, August.

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