We provide a necessary and a sufficient condition on an individual’s expected utility function under which any zero-mean idiosyncratic risk increases cautiousness (the derivative of the reciprocal of the absolute risk aversion), which is the key determinant for this individual’s demand for options and portfolio insurance. JEL Classification Codes: D51, D58, D81, G11, G12, G13.

The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast, not only comes with a danger that punishments will be misapplied, but also should have no efficiency b...

We analyze the e¤ects of family ties on the incentives for production of e¤ort, where family ties are de…ned as a mixture of true and coerced altruism between family members. We model families as pairs of siblings. Each sibling exerts e¤ort in order to obtain output under uncertainty. A social norm dictates that a sibling with a high output must share a speci…ed amount of this output with his s...

Today, nine OECD countries have national terrorism insurance programs based on some type of public-private risk sharing. While such arrangements helped provide the necessary insurance capacity in the post-September 11, 2001 era, little is known about the impact of such governmental intervention in terrorism insurance markets. This paper focuses on the United States, where the Terrorism Risk Ins...

This study examines the relationship between the life insurance and economic growth in India. The total life insurance premium (TLIP), and total life insurance investment (TLII), are used as proxy for life insurance and Gross Domestic Product (GDP) is used for the economic growth. The data has been compiled from the Handbook on Indian Insurance Statistics, IRDA annual reports and economic surve...

Comparative Advantage, Segmentation and Informal Earnings: A Marginal Treatment Effects Approach This paper employs recently developed econometric models of marginal treatment effects to analyze the relevance of labor market comparative advantage and segmentation in the participation and earnings performance of workers in formal and informal jobs in Argentina. A novel household data set on info...

This paper investigates the role of risk-aversion in the allocation of workers between formal and informal jobs in Ghana. In the model I propose risk-averse workers can opt between the free-entry informal sector and queuing for formal occupations. Conditional on identifying the riskier option, the model yields testable implications on the relationship between risk-preferences and workers’ alloc...

The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast, not only comes with a danger that punishments will be misapplied, but also should have no efficiency b...

Informal care is an important source of long-term care (LTC) for persons with dementia and cognitive impairments. Using the Aging Demographic and Memory Study (ADAMS) dataset this study analyzes a sequence of predisposing, enabling and need factors that jointly predict the amount of informal and formal health care received by individuals with dementia in the US. The „altruistic‟ motivation to p...

Few micro…nance-funded businesses grow beyond subsistence entrepreneurship. This paper considers one possible explanation: that the structure of existing micro…nance contracts may discourage risky but high-expected return investments. To explore this possibility, I develop a theory that uni…es models of investment choice, informal insurance, and formal …nancial contracts. I then test the predic...