Mutual Insurance, Individual Savings and Limited Commitment
AbstractThis paper examines a dynamic model of mutual insurance when households can also engage in self-insurance by storage. This mutual insurance is informal as it is assumed that there is no enforcement mechanism, so any mutual insurance arrangements must be self-enforcing. It is shown how consumption allocations satisfy a modified Euler condition and that an enhanced storage technology can either raise or diminish welfare. Furthermore it is shown that the ex ante transfers introduced into dynamic informal insurance models recently by Gauthier, Poitevin, and Gonz´alez (1997) are only used here in the first period, with the role of ex ante transfers being replaced by differential individual storage.
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Bibliographic InfoPaper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number 98/14.
Date of creation: 1998
Date of revision:
Publication status: Published in Review of Economic Dynamics, Vol. 3(2), April 2000, pages 216-246.
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Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
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Postal: Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom
Other versions of this item:
- Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2000. "Mutual Insurance, Individual Savings and Limited Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 216-246, April.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D90 - Microeconomics - - Intertemporal Choice - - - General
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
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