Suchergebnisse

The standard literature on the value of life relies on Yaari's (1965) model, whichincludes an implicit assumption of risk neutrality with respect to life duration. Tooverpass this limitation, we extend the theory to a simple variety of nonadditivelyseparable preferences. The enlargement we propose is relevant for the evaluation oflife-saving programs: current practice, we estimate, puts too little weight on mortalityrisk reduction of the young. Our correction exceeds in magnitude that introduced bythe switch from the notion of number of lives saved to the notion of years of life saved.

The standard literature on the value of life relies on Yaari's (1965) model, whichincludes an implicit assumption of risk neutrality with respect to life duration. Tooverpass this limitation, we extend the theory to a simple variety of nonadditivelyseparable preferences. The enlargement we propose is relevant for the evaluation oflife-saving programs: current practice, we estimate, puts too little weight on mortalityrisk reduction of the young. Our correction exceeds in magnitude that introduced bythe switch from the notion of number of lives saved to the notion of years of life saved.

AbstractWe analyze the impact of risk aversion and ambiguity aversion on the competing demands for annuities and bequeathable savings using a lifecycle recursive utility model. Our main finding is that risk aversion and ambiguity aversion have similar effects: an increase in either of the two reduces annuity demand and enhances bond holdings. We obtain this unequivocal result in the flexible intertemporal framework of Hayashi and Miao (2011) by assuming that the agent's preferences are monotone with respect to first-order stochastic dominance. Our contribution is then twofold. First, from a decision-theoretic point of view, we show that monotonicity allows one to obtain clear-cut results about the respective roles of risk and ambiguity aversion. Second, from the insurance point of view, our result that the demand for annuities decreases with risk and ambiguity aversion stands in contrast with what is usually found with other insurance products. As such, it may help explain the low annuitization level observed in the data.

Abstract This paper studies the normative problem of redistribution between individuals who differ in their lifespans. We discuss aspects related to the objective function and argue that aversion to multiperiod inequality should be taken into account. Then, we study the properties of the social optimum both with full information and with asymmetric information. We highlight the role of aversion to multiperiod inequality and show that it has substantial consequences on the design of Social Security schemes. In particular, we show that for a low (resp. high) aversion to multiperiod inequality, a negative (resp. positive) implicit tax rate on continued activity is desirable.