Consumption Insurance and Risk-Coping Strategies under Non-Separable Utility: Evidence from the Kobe Earthquake
AbstractUsing a unique household-level dataset on the situation after the Kobe earthquake in 1995, we test the full consumption risk sharing hypothesis, relaxing the separability assumption, and examine households' simultaneous choice of risk coping measures. Using multivariate probit estimations, we find that the full consumption insurance hypothesis is strongly rejected and our results indicate that households' utility across different expenditure items is not separable. As for households' choice of risk-coping measures, households borrowed extensively against housing damage, but relied on dissaving to cope with smaller asset damage, implying a hierarchy of risk-coping measures from dissaving to borrowing.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-512.
Length: 34 pages
Date of creation: Sep 2007
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Other versions of this item:
- Yasuyuki Sawada & Satoshi Shimizutani, 2007. "Consumption Insurance and Risk-Coping Strategies under Non-Separable Utility: Evidence from the Kobe Earthquake," CARF F-Series CARF-F-106, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
- NEP-ALL-2007-09-09 (All new papers)
- NEP-IAS-2007-09-09 (Insurance Economics)
- NEP-UPT-2007-09-09 (Utility Models & Prospect Theory)
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- Eswaran, Mukesh & Kotwal, Ashok, 1989. "Credit as insurance in agrarian economies," Journal of Development Economics, Elsevier, vol. 31(1), pages 37-53, July.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Collective Disasters and Individual Responsibility: Lessons from the Kobe earthquake
by Frances Woolley in Worthwhile Canadian Initiative on 2011-04-27 16:24:02
- TAMURA Sakuya & SAWADA Yasuyuki, 2009. "Consumption Insurance against Unforeseen Epidemics:The Case of Avian Influenza in Vietnam," Discussion papers 09023, Research Institute of Economy, Trade and Industry (RIETI).
- Yasuyuki Sawada & Satoshi Shimizutani, 2011. "Changes in durable stocks, portfolio allocation, and consumption expenditure in the aftermath of the Kobe earthquake," Review of Economics of the Household, Springer, vol. 9(4), pages 429-443, December.
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