We study insurance markets with individuals that have limited financial literacy. In our model, complexity of insurance contracts causes individuals to be uncertain about insurance payouts. As a result, a trade-off between second-order (risk aversion) and third-order (prudence) risk preferences...

This paper studies insurance demand for individuals with limited financial literacy. We propose uncertainty about insurance payouts, resulting from contract complexity, as a novel channel that affects decision-making of financially illiterate individuals. Then, a trade-off between second-order...

The wide gulf between actual and predicted annuity demand has been well documented. However, a comparable gap exists between the current and ideal annuity market. In a world with costly and limited annuity products, we investigate what types of new annuity products could improve annuity market...

I propose an intertemporal precautionary saving model in which the agent's labor income is subject to (possibly correlated) shocks with different degrees of persistence and volatility. However, he only observes his total income, not individual components. I show that partial observability of...

This chapter is concerned with the distribution of personal wealth, which usually refers to the material assets that can be sold in the marketpace, although on occasion pension rights are also included. We summarise the available evidence on wealth distribution for a number of countries. This...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...

The buffer-stock model of precautionary saving has become a workhorse of modern-day consumer theory. Despite its growing popularity, virtually no research has set out to formally investigate whether buffer-stock behavior can replicate the well-known smoothness of aggregate consumption growth...

This paper examines an unconventional, but potentially effective, new fiscal policy tool that can increase saving during good times and increase spending during bad times -- a cyclical matching rate on contributions to retirement savings accounts. The combination of matching rates and matching...

We compile, generalize and extend the results about the comparative static effects of risk changes on optimal risk-reduction and saving behavior. We use the time-separable discounted expected-utility model and consider income risk, inflation risk, and interest rate risk. For each type of risk,...

We use administrative data for Norway to estimate an incomplete-market life-cycle model of retired singles and couples with a bequest motive, health-dependent utility, and uncertain longevity and health. We allow the parameters of the bequest utility to differ between households with and without...