Insurance, Consumption, and Saving: A Dynamic Analysis in Continuous Time
AbstractThis paper shows how the demand for non-life insurance interacts with consumption and saving. The analysis is set in continuous time, using the maximum principle. When insurance is actuarially fair, the insurance and consumption decisions are separable. With loaded premiums, and alternatively without insurance, optimal consumption is dynamically related to the growth rate of the loss probability, and a growing loss probability generates precautionary saving. With loaded premiums, less than full insurance is demanded at each instant, and optimal cover varies over time, whether or not the loss probability is constant.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 94 (2004)
Issue (Month): 4 (September)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David F. Bradford & Kyle Logue, 1998.
"The Effects of Tax Law Changes on Property-Casualty Insurance Prices,"
in: The Economics of Property-Casualty Insurance, pages 29-80
National Bureau of Economic Research, Inc.
- David F. Bradford & Kyle Logue, 1996. "The Effects of Tax-Law Changes on Property-Casualty Insurance Prices," NBER Working Papers 5652, National Bureau of Economic Research, Inc.
- Mayers, David & Smith, Clifford W, Jr, 1983. "The Interdependence of Individual Portfolio Decisions and the Demand for Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 304-11, April.
- Olivia S. Mitchell & James M. Poterba & Mark J. Warshawsky, 1997.
"New Evidence on the Money's Worth of Individual Annuities,"
NBER Working Papers
6002, National Bureau of Economic Research, Inc.
- Olivia S. Mitchell, 1999. "New Evidence on the Money's Worth of Individual Annuities," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1299-1318, December.
- Olivia S. Mitchell & James M. Poterba & Mark J. Warshawsky, . "New Evidence on the Money's Worth of Individual Annuities," Pension Research Council Working Papers 97-9, Wharton School Pension Research Council, University of Pennsylvania.
- Eeckhoudt, Louis & Meyer, Jack & Ormiston, Michael B, 1997. "The Interaction between the Demands for Insurance and Insurable Assets," Journal of Risk and Uncertainty, Springer, Springer, vol. 14(1), pages 25-39, January.
- DREZE, Jacques H. & MODIGLIANI, Franco, .
"Cosumption decisions under uncertainty,"
CORE Discussion Papers RP
-119, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Dionne, G. & Eeckhoudt, L., 1982.
"Insurance and Saving: Some Further Results,"
Cahiers de recherche, Universite de Montreal, Departement de sciences economiques
8231, Universite de Montreal, Departement de sciences economiques.
- Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 90(4), pages 630-49, November.
- Cooper, Russell & Hayes, Beth, 1987. "Multi-period insurance contracts," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 5(2), pages 211-231.
- Joseph G. Eisenhauer, 2002. "Relative Effects of Premium Loading and Tax Deductions on the Demand for Insurance," Journal of Insurance Issues, Western Risk and Insurance Association, vol. 25(1), pages 47-62.
- Frédéric Gannon & Vincent Touze, 2007. "Insurance and Optimal Growth," Sciences Po publications info:hdl:2441/4422, Sciences Po.
- repec:spo:wpecon:info:hdl:2441/4422 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.