Recent empirical work finds that surprisingly little variation in the demand for insurance is explained by heterogeneity in risks. I distinguish between heterogeneity in risk preferences and risk perceptions underlying the unexplained variation. Heterogeneous risk perceptions induce a systematic...

With heterogeneity in both skills and discount factors, the Atkinson- Stiglitz theorem that savings should not be taxed does not hold. In a model with heterogeneity of preferences at each earnings level, introducing a savings tax on high earners or a savings subsidy on low earners increases...

The rich live longer than the poor, but relatively little is known about the evolution of health inequality across the lifecycle. Using rich administrative data from the Netherlands, we develop an index of chronic disease burden based on the projected contribution to old-age mortality. Chronic...

We propose a mechanism which implements a unique solution to the bargaining problem with two players in subgame-perfect equilibrium. Players start by making claims and accept a compromise only if they cannot gain by pursuing their claim in an ultimatum. The player offering the lowest resistance...

Individuals have differing beliefs about risks they face and their ability to mitigate these risks. Profit-maximizing firms exploit these differences, even if beliefs are unobservable. I show that firms screen identical agents with different beliefs by providing less insurance to optimists than...

This paper analyzes unemployment insurance contracts that combine monetary benefits and training. Unemployment insurance trades off the provision of search incentives and insurance against both the temporary loss of income and future losses in earnings due to the decrease in human capital. Human...