Are compulsory insurance and self-insurance substitutes or complements? A matter of risk attitudes

François Pannequin (ENS Paris-Saclay)

 

Abstract:

This article analyzes the effects of compulsory insurance on the demand for self-insurance. We show that although a risk lover invests neither in insurance nor in self-insurance when insurance is voluntary, she invests in self-insurance when insurance is compulsory. On the contrary, when insurance is mandatory, a risk averter would substitute self-insurance for insurance. Economic policy implications of these antagonistic effects on self-insurance are discussed.

Co-authored with A. Corcos.