Insurance and Information: Firms as a Commitment Device

A.L. Bovenberg, C.N. Teulings

Research output: Working paperDiscussion paperOther research output

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Abstract

We explore the role of firms in insuring risk-averse workers.As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the spot market if workers are suciently risk averse and the firm can base incentive payments on good information.Competition, however, may allow the spot market and explicit contracts to crowd out implicit insurance provided by the firm, even though the latter yields higher welfare.We explain why dierent governance structures coexist in quite homogeneous industries.
Original languageEnglish
Place of PublicationTilburg
PublisherMacroeconomics
Number of pages42
Volume2002-36
Publication statusPublished - 2002

Publication series

NameCentER Discussion Paper
Volume2002-36

Fingerprint

Insurance
Workers
Spot market
Risk-averse
Industry
Payment
Governance structure
Incentives
Crowd-out

Keywords

  • information
  • labour
  • insurance
  • moral hazard
  • contracts
  • principal agent theory

Cite this

Bovenberg, A. L., & Teulings, C. N. (2002). Insurance and Information: Firms as a Commitment Device. (CentER Discussion Paper; Vol. 2002-36). Tilburg: Macroeconomics.
Bovenberg, A.L. ; Teulings, C.N. / Insurance and Information : Firms as a Commitment Device. Tilburg : Macroeconomics, 2002. (CentER Discussion Paper).
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Bovenberg, AL & Teulings, CN 2002 'Insurance and Information: Firms as a Commitment Device' CentER Discussion Paper, vol. 2002-36, Macroeconomics, Tilburg.

Insurance and Information : Firms as a Commitment Device. / Bovenberg, A.L.; Teulings, C.N.

Tilburg : Macroeconomics, 2002. (CentER Discussion Paper; Vol. 2002-36).

Research output: Working paperDiscussion paperOther research output

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KW - insurance

KW - moral hazard

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KW - principal agent theory

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Bovenberg AL, Teulings CN. Insurance and Information: Firms as a Commitment Device. Tilburg: Macroeconomics. 2002. (CentER Discussion Paper).