Political sustainability and the design of social insurance

This paper examines how the issue of political support affects the design o f social insurance. It distinguishes between redistributive character and s ize of social protection. Three main results emerge. First, it may be appro priate to adopt a system which is less redistributive than otherwise optima l, in order to ensure political support for an adequate level of coverage i n the second (voting) stage. Second, supplementary private insurance may in crease the welfare of the poor, even if it is effectively bought only by th e rich. Third, the case for prohibiting (supplementary) private insurance m ay become stronger when the efficiency of private insurance markets increas es. (C) 2000 Elsevier Science S.A. All rights reserved. JEL classification: H23: D72; H50.