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The demand for life insurance in a heterogeneous-agent life cycle economy with joint decisions

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  • Ning Wang

    (University of North Georgia)

Abstract

A life cycle model is developed to explain how and why life insurance demand of household participants varies and to further explore risk sharing effects within a household. The model includes endogenous labor supply and joint decisions of life insurance demand for men and women, and generates consumption with a sudden drop around retirement and hump-shaped wealth and life insurance. The results show that life insurance demand peaks earlier in single-parent households than married-couple households and that life insurance demand has an ambiguous relationship with mortality and wealth. The results suggest that gender disparity in life insurance demand is due to income gap. The results indicate that the effect of a spouse’s earnings on the other spouse’s demand for life insurance depends on the correlation of income between the spouses under mortality risk, and labor income risk diversification plays a role in this effect.

Suggested Citation

  • Ning Wang, 2019. "The demand for life insurance in a heterogeneous-agent life cycle economy with joint decisions," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 44(2), pages 176-206, September.
    • Handle: RePEc:pal:genrir:v:44:y:2019:i:2:d:10.1057_s10713-019-00040-0
    DOI: 10.1057/s10713-019-00040-0
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    References listed on IDEAS

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    Cited by:

    1. Ning Wang, 2023. "A dynamic analysis of the demand for life insurance during the 2008 financial crisis: evidence from the panel Survey of Consumer Finances," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 48(4), pages 733-759, October.
    2. Ropponen, Olli & Kuusi, Tero & Valkonen, Tarmo, 2022. "Mind the Gap – Assessing the Size and Determinants of the Life Insurance Gap," ETLA Working Papers 96, The Research Institute of the Finnish Economy.

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    More about this item

    Keywords

    Life insurance; Life cycle model; Heterogeneous agent; Joint decision;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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