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Background Uncertainty and the Demand for Insurance Against Insurable Risks

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  • Guiso, Luigi
  • Jappelli, Tullio

Abstract

Theory suggests that people facing higher uninsurable background risk buy more insurance against other risks that are insurable. This proposition is supported by Italian cross-sectional data. It is shown that the probability of purchasing casualty insurance increases with earnings uncertainty. This finding is consistent with consumer preferences being characterized by decreasing absolute prudence.

Suggested Citation

  • Guiso, Luigi & Jappelli, Tullio, 1996. "Background Uncertainty and the Demand for Insurance Against Insurable Risks," CEPR Discussion Papers 1423, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1423
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    More about this item

    Keywords

    Background Risk; Insurance; Prudence;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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