A Theory of Health Investment under Competing Mortality Risks

In this paper we present a theory of health investment when there are multiple causes of death. Since there are several risks “competing“ for one's life, the health investments in avoiding different causes of death are not independent in general. We analyze the optimal investment rules and the comparative statics. In particular, we search for the conditions that make such health investments normal goods, non-Giffen goods, gross complements to one another, and have a positive risk aversion effect. If the proposed conditions fail, then some health investments may become net substitutes, or even gross substitutes to one another.competing risks, complementarity, quantity and quality of life, and dominant diagonal matrix

Property Insurance, Portfolio Selection and their Interdependence

This paper studies the interdependence between property insurance and portfolio selection. The insurance premium of property loss is shown to play the role of subsistence consumption in the analysis. Then, “security” becomes a necessity good and an increase in any insurance parameter would make the investor more “conservative.” The effect of a stock market parameter on the marginal propensity to insure is shown to be opposite that on the marginal propensity to consume. Consequently, an increase in volatility would encourage those with a greater-than-unity relative risk aversion to purchase more insurance at the expense of current consumption.insurance premium, subsistence consumption, portfolio substitution, optimal saving under uncertainty

Life Insurance, Precautionary Saving and Contingent Bequest

Purchasing life insurance is for the welfare of young children, par-ticularly preteens, who are liquidity constrained. In this paper, we present a life cycle model of life insurance that takes into account the ages of these young beneciaries. We show that, as the child ages, the need for protection is reduced and, consequently, the size of contingent bequest may shrink. The demand for life insurance is positively related to the number, age differentials, living standards, and the time needed to reach adulthood. Also, the breadwinner's life-time uncertainty and the unfairness of the insurance market encourage precautionary saving.Loading factor, birth order, actuarial rate of interest, and the age of independence

Uncertain Lifetimes, Retirement and Economic Welfare.

The effect of increased life expectancy on retirement age is ambiguous because a change in the survival probability is analogous to a change in intertemporal prices. It is shown that the decision to retire earlier or later depends on the old-age saving behavior. Early retirement could emerge if one saves in old age. It is also shown that the effect of intertemporal substitutions, arising from the imperfection of the annuity market, could produce a tilt to the reservation wage profile, which, in turn, makes early retirement possible. Copyright 1991 by The London School of Economics and Political Science.