Similar Search Results

Insurance Demand under Prospect Theory:A Graphical Analysis

Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2012

This paper analyzes insurance demand under prospect theory in a simple model with two states of the world and fair insurance contracts. We argue that two different reference points are reasonable in this framework, state-dependent initial wealth or final wealth after buying full insurance....

Persistent link: https://www.econbiz.de/10010886880

Financial Literacy and Its Consequences in the Emerging Middle Class

Grohmann, Antonia; Kouwenberg, Roy; Menkhoff, Lukas - Institut für Weltwirtschaft (IfW) - 2014

This paper analyzes the state and impact of financial literacy in a so far largely neglected group: the middle class in emerging economies. This group is of increasing importance for implementing structural change, including the proper use of sophisticated financial products. We survey middle...

Persistent link: https://www.econbiz.de/10010887004

Insurance Demand and Prospect Theory

Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2012

Empirical evidence has shown that people are unwilling to insure rare losses at subsidized premiums and at the same time take-up insurance for moderate risks at highly loaded premiums. This paper explores whether prospect theory, in particular diminishing sensitivity and loss aversion, can...

Persistent link: https://www.econbiz.de/10009391896

Current Account Imbalances and Income Inequality: Theory and Evidence

Al-Hussami, Fares; Remesal, Álvaro Martín - Institut für Weltwirtschaft (IfW) - 2012

In this paper we analyze theoretically and empirically the impact of an increase in income inequality on the current account balance. We develop a model with consumption externalities and heterogeneous agents which explains how an increase in income inequality can affect negatively or positively...

Persistent link: https://www.econbiz.de/10010886828

Risk Preferences may be Time Preferences: A Comment on Andreoni and Sprenger (2012)

Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2014

In an intensively discussed paper, Andreoni and Sprenger (2012) , henceforth A&S, present an experiment where subjects can allocate money between two different points of time under the condition of risk. A&S claim that their results refute discounted expected utility (DEU) as well as prospect...

Persistent link: https://www.econbiz.de/10010886922

Boats and tides and "Trickle Down" theories: What economists presume about wellbeing when they employ stochastic process theory in modeling behavior

Anderson, Gordon - Institut für Weltwirtschaft (IfW) - 2012

Aphorisms that "Rising tides raise all boats" or that material advances of the rich eventually "Trickle Down" to the poor are really maxims regarding the nature of stochastic processes that underlay the income/wellbeing paths of groups of individuals. This paper looks at the implications for the...

Persistent link: https://www.econbiz.de/10010956065

Variable Retirement and the Effects of Social Insurance on Savings, Wealth, and Welfare

Turnovsky, Stephen J.; Bruce, Neil - Institut für Weltwirtschaft (IfW) - 2007

We construct a Blanchard-style overlapping generations model consisting of long-lived individuals who have uninsurable idiosyncratic risk resulting from uncertain retirement periods and medical costs in retirement. Without social insurance, such individuals must save for these eventualities. We...

Persistent link: https://www.econbiz.de/10005083411

Confronting the Representative Consumer with Household-Size Heterogeneity

Koulovatianos, Christos; Schröder, Carsten; Schmidt, Ulrich - Institut für Weltwirtschaft (IfW) - 2010

using insights from the way a single representative household would behave. Heterogeneity at the micro level can jeopardize …-level heterogeneity is household size, as individuals living in multi-member households have the potential to share goods within the … household, benefiting from household-size economies. Theoretically, we show that validating the role of a representative …

Persistent link: https://www.econbiz.de/10008727755

A tale of two debt crises: a stochastic optimal control analysis

Stein, Jerome L. - Institut für Weltwirtschaft (IfW) - 2009

Banks should evaluate whether a borrower is likely to default. The author applies several techniques in the extensive mathematical literature of stochastic optimal control/dynamic programming to derive an optimal debt in an environment where there are risks on both the asset and liabilities...

Persistent link: https://www.econbiz.de/10008561122

The Welfare Costs of HIV/AIDS in Eastern Europe: An Empirical Assessment Using the Economic Value-of-Life Approach

Fimpel, Julia; Stolpe, Michael - Institut für Weltwirtschaft (IfW) - 2006

Based on the aggregation of individual willingness-to-pay for a statistical life, we calibrate an intertemporal optimization model to determine the aggregate welfare losses from HIV/AIDS in 25 Eastern European countries. Assuming a discount rate of three percent, we find a total welfare loss for...

Persistent link: https://www.econbiz.de/10005755131