publication . Research . 2002

The Dynamics of Market Insurance, Insurable Assets, and Wealth Accumulation

Koeniger, Winfried;
Open Access English
  • Published: 01 Jan 2002
  • Publisher: Bonn: Institute for the Study of Labor (IZA)
Abstract
We analyze dynamic interactions between market insurance, the stock of insurable assets and liquid wealth accumulation in a model with non-durable and durable consumption. The stock of the durable is exposed to risk against which households can insure. Since the model does not have a closed form solution we first provide an analytical approximation for the case in which households own abundant liquid wealth. It turns out that precautionary motives still matter because of fluctuations of the predetermined durable stock. Second we solve the model numerically. With deterministic labor income the representative agent demands a nonnegligible amount of market insuranc...
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Subjects
free text keywords: D81, G22, E21, consumption, durables, labor income risk, Versicherungsökonomik, Dauerhaftes Konsumgut, Konsumtheorie, Vermögensbildung, Zeitpräferenz, Verdienstausfall, Risiko, Theorie, ddc:330
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