Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95
Journal
IZA Discussion Papers 240
Type
discussion paper
Date Issued
2001-01
Author(s)
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.
Language
English
Keywords
Labor income risk
insurance
imperfect markets
precautionary motive
United Kingdom
HSG Classification
contribution to scientific community
HSG Profile Area
SEPS - Economic Policy
Subject(s)
Eprints ID
261032