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

Author

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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.

Suggested Citation

  • Koeniger, Winfried, 2001. "Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95," IZA Discussion Papers 240, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp240
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    Cited by:

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    2. Patrick Michael Bernet, 2004. "The Influence of Prescription Drug Use on Long‐Term Care Insurance Ownership," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 7(2), pages 107-120, September.

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    More about this item

    Keywords

    precautionary motive; Labor income risk; insurance; imperfect markets; United Kingdom;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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