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Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95

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  • Koeniger, Winfried

    ()
    (University of St. Gallen)

Abstract

Microeconomic theory predicts that under certain regularity conditions higher idiosyncratic risk increases the propensity to insure against independent marketable risks. We apply these predictions to the specific case of labor income risk and car insurance using data from the UK. The main empirical results are: - higher labor income risk induces a higher demand for car insurance. - the effects of increases in labor income risk after 1979 seem to be more than offset by a more liberal financial market. - the effects seem to be important on the macro level in the 70s whereas they become negligible in the 80s and 90s.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 240.

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Length: 56 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:iza:izadps:dp240

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Keywords: precautionary motive; Labor income risk; insurance; imperfect markets; United Kingdom;

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Cited by:
  1. Menhart, Michael & Rennhak, Carsten, 2006. "Drivers of the lifecycle: the example of the German insurance industry," Reutlingen Working Papers on Marketing & Management 2006-03, Reutlingen University, ESB Business School.

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