Labor and Financial Market Interactions: The Case of Labor Income Risk and Car Insurance in the UK 1969-95

Winfried Koeniger ()

No 240, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: Microeconomic theory predicts that under certain regularity conditions higher idiosyncratic risk increases the propensity to insure against independent marketable risks. We apply these predictions to the specific case of labor income risk and car insurance using data from the UK. The main empirical results are: - higher labor income risk induces a higher demand for car insurance. - the effects of increases in labor income risk after 1979 seem to be more than offset by a more liberal financial market. - the effects seem to be important on the macro level in the 70s whereas they become negligible in the 80s and 90s.

Keywords: precautionary motive; Labor income risk; insurance; imperfect markets; United Kingdom (search for similar items in EconPapers)
JEL-codes: D12 D81 G22 J31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fmk
Date: 2001-01
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