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

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

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

Optimal growth and impatience : a phase diagram analysis

In this paper we show that we can replace the assumption of constant discount rate in the onesector optimal growth model with the assumption of decreasing marginal impatience without losing major properties of the model. In particular, we show that the steady state exists, is unique, and has a saddle-point property. All we need is to assume that the discount function is strictly decreasing, strictly convex and has a uniformly bounded first-derivative

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

On the Elasticities of Harvesting Rules

In this paper, we rank the relative importance of the exogenous parameters upon the optimal harvesting size in a stochastic rotation problem. We show that when the tree growth follows geometric Brownian motion, the harvesting size is most elastic to the harvesting cost, followed by the interest rate, and is least elastic to the parameters of tree growth. Similar ranking holds for the linear growth case. In both cases the harvesting size is increasing and concave in the harvesting cost, bounded between two parallel lines. The harvesting decision is made according to a stochastic extension of the Faustmann formula

Optimal Growth and Impatience: A Phase Diagram Analysis

2004-10In this paper we show that we can replace the assumption of constant discount rate in the one-sector optimal growth model with the assumption of decreasing marginal impatience without losing major properties of the model. In particular, we show that the steady state exists, is unique, and has a saddle point property. All we need is to assume that the discount function is convex and has a uniformly bounded first-derivative.departmental bulletin pape