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Background Uncertainty and the Demand for Insurance Against Insurable Risks

  • Guiso, Luigi
  • Jappelli, Tullio

Theory suggests that people facing higher uninsurable background risk buy more insurance against other risks that are insurable. This proposition is supported by Italian cross-sectional data. It is shown that the probability of purchasing casualty insurance increases with earnings uncertainty. This finding is consistent with consumer preferences being characterized by decreasing absolute prudence.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1423.

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Date of creation: Jun 1996
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Handle: RePEc:cpr:ceprdp:1423
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