IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v38y2013i3p469-494.html
   My bibliography  Save this article

The Welfare Economics of Catastrophe Losses and Insurance

Author

Listed:
  • Dwight Jaffee

    (Haas School of Business, University of California, Berkeley, 2220 Piedmont Avenue, Berkeley, CA 94708, U.S.A.)

  • Thomas Russell

    (Emeritus Professor, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053 U.S.A.)

Abstract

This paper uses the tools of welfare economics to analyse the appropriate mix of private sector and government responses to catastrophic events. In particular, we examine the appropriate roles of post-disaster government aid, private insurance and mitigation activities. The analysis focuses on the distinction between the ex ante and ex post welfare criteria, as well as incentive issues such as may arise from the Samaritan's dilemma. A key factor is that individuals maintain differing subjective beliefs concerning the probability or magnitude of the catastrophic event. The analysis applies to insurance markets certain concepts that are now also being developed in the finance literature to examine the efficiency of naked credit default swaps and other instruments that are in essence side bets among agents with heterogeneous beliefs. We conclude that ex post welfare economics provides fundamental insights that have not been previously integrated into the discussions concerning the losses created by catastrophic events, including a potential role for mandatory insurance.

Suggested Citation

  • Dwight Jaffee & Thomas Russell, 2013. "The Welfare Economics of Catastrophe Losses and Insurance," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 38(3), pages 469-494, July.
    • Handle: RePEc:pal:gpprii:v:38:y:2013:i:3:p:469-494
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/gpp/journal/v38/n3/pdf/gpp201317a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: http://www.palgrave-journals.com/gpp/journal/v38/n3/full/gpp201317a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kousky, Carolyn, 2012. "Informing Climate Adaptation: A Review of the Economic Costs of Natural Disasters, Their Determinants, and Risk Reduction Options," RFF Working Paper Series dp-12-28, Resources for the Future.
    2. Justin Gallagher & Daniel Hartley, 2017. "Household Finance after a Natural Disaster: The Case of Hurricane Katrina," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 199-228, August.
    3. Selene Perazzini, 2020. "Public-Private Partnership in the Management of Natural Disasters: A Review," Papers 2006.05845, arXiv.org.
    4. Menna Hassan & Nourhan Sakr & Arthur Charpentier, 2022. "Government Intervention in Catastrophe Insurance Markets: A Reinforcement Learning Approach," Papers 2207.01010, arXiv.org.
    5. Arthur Charpentier & Laurence Barry & Molly R. James, 2022. "Insurance against natural catastrophes: balancing actuarial fairness and social solidarity," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 47(1), pages 50-78, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:38:y:2013:i:3:p:469-494. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.