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Type | Journal Article |
Scope | Discipline-based scholarship |
Title | Risk aversion and the composition of wealth in the demand for full insurance coverage |
Organization Unit | |
Authors |
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Item Subtype | Original Work |
Refereed | Yes |
Status | Published in final form |
Language |
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Journal Title | Swiss Journal of Economics and Statistics = Schweizerische Zeitschrift für Volkswirtschaft und Statistik |
Publisher | Springer |
Geographical Reach | international |
ISSN | 0303-9692 |
Volume | 122 |
Number | 3 |
Page Range | 359 - 370 |
Date | 1986 |
Abstract Text | The economic literature on the demand for non-life insurance has mainly emphasized the influence of risk aversion. Under the assumption of decreasing absolute risk aversion, it has been shown that insurance should be an inferior good. Under the assumption of increasing relative risk aversion, it has been shown that the wealth elasticity of insurance should exceed one. These seemingly contradictory propositions are due to strong implicit assumptions about changes in the composition of wealth. The present paper proposes a more general model where the effects of risk aversion and of the composition of wealth are considered jointly. Necessary and sufficient conditions for a decrease in the willingness-to-insure are defined, and their implications for the interpretation of empirical results on insurance spending and risk-averse behavior are pointed out. |
Free access at | Related URL |
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Other Identification Number | merlin-id:13233 |
PDF File | Download from ZORA |
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