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An OLG Model for Optimal Investment and Insurance Decisions

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  • Bingqing Li
  • Pu Liao
  • Jingfeng Xu

Abstract

type="main" xml:lang="en"> This article uses overlapping generation (OLG) model to study individuals' optimal decision on consumption, investment, insurance, and education expenses. To the best of our knowledge, we are the first to discuss the individuals' demand for insurance with the consideration of intergenerational transfer payments. In the article, we incorporate insurance into the OLG model to describe individuals' optimization problem on consuming and saving, and we solve the optimal proportions of expenditure on investment, survival insurance, life insurance, and education, with the optimal consumption to be the remaining parts of expenditure. We observe that the numerical outputs are consistent with the actual data. It is also interesting to find that the human capital investment is independent of both risky asset investment and individuals' risk aversion coefficient.

Suggested Citation

  • Bingqing Li & Pu Liao & Jingfeng Xu, 2015. "An OLG Model for Optimal Investment and Insurance Decisions," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 82(1), pages 149-172, March.
    • Handle: RePEc:bla:jrinsu:v:82:y:2015:i:1:p:149-172
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    Cited by:

    1. Hun Seog, S. & Hong, Jimin, 2022. "Market insurance and endogenous saving with multiple loss states," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).
    2. Pu Liao & Zhihong Dou & Xingxing Guo, 2021. "The Effect of Health Shock and Basic Medical Insurance on Family Educational Investment for Children in China," IJERPH, MDPI, vol. 18(10), pages 1-16, May.

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