Wealth Effects on Self-insurance

Kangoh Lee ()
Additional contact information
Kangoh Lee: Department of Economics, San Diego State University, 5500 Campanile Drive, San Diego, CA 92182-4485, U.S.A.

The Geneva Risk and Insurance Review, 2010, vol. 35, issue 2, 160-171

Abstract: This paper considers the wealth effects on self-insurance investment that reduces loss. Wealthier individuals can bear the risk better, and invest less in self-insurance with two states of the world. Self-insurance, like insurance, is thus an inferior good. This known result does not extend to many states. The reason is that an increase in self-insurance does not necessarily reduce final wealth in good states and increase it in bad states. Self-insurance thus may not act as insurance, and wealthier individuals may not necessarily invest less in self-insurance. The paper proposes a condition under which self-insurance is inferior, and a condition under which it is normal.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.palgrave-journals.com/grir/journal/v35/n2/pdf/grir20106a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/grir/journal/v35/n2/full/grir20106a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:genrir:v:35:y:2010:i:2:p:160-171

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10713

Access Statistics for this article

The Geneva Risk and Insurance Review is currently edited by Michael Hoy and Nicolas Treich

More articles in The Geneva Risk and Insurance Review from Palgrave Macmillan, International Association for the Study of Insurance Economics (The Geneva Association) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().