Avia Spivak

The Family as an Incomplete Annuities Market

Families can self-insure against uncertain dates of death through implicit or explicit agreements with respect to consumption and interfamily transfers. Interfamily transfers need have nothing to do with altruistic feelings; they may simply reflect risk-sharing behavior of completely selfish family members. Although family annuity markets are incomplete, even small families can substitute by more than 70 percent for perfect market annuities. Given adverse selection and transaction costs, family risk pooling may be preferred to public market annuities. In the absence of public annuities, these risk-sharing arrangements provide powerful incentives for marriage and family formation.

First order versus second order risk aversion

This paper defines a new concept of attitude towards risk. For an actuarially fair random variable ϵ, π(t) is the risk premium the decisionmaker is willing to pay to avoid tϵ. In expected utility, and as it turns out, in the case of smooth Freechet differentiability of the representation functional, π′(0) = 0. There are models (e.g., rank dependent probabilities) in which ∂π∂t|t=0+ ≠ 0. We call the latter attitude as being of order 1, and we call the first one attitude of order 2. These concepts are then applied to analyze the problem of full insurance.

The Effect of Annuity Insurance on Savings and Inequality

This paper examines the amount of precautionary savings and wealth inequality arising from life-span uncertainty by comparing saving behavior under perfect insurance arrangements with that arising under imperfect arrangements, namely, when longevity risk can be pooled only with members of ones own family. The central findings of the paper are that (1) perfecting insurance arrangements can sharply lower savings in both intergenerationally altruistic and life-cycle economies and that (2) in altruistic economies perfecting annuity insurance can greatly influence inequality; indeed, in the long run in our model, switching from imperfect family insurance to perfect insurance can mean the difference between absolute inequality and absolute equality.

First-Order Risk Aversion and Non-Differentiability

SummaryFirst-order risk aversion happens when the risk premiumπ a decision maker is willing to pay to avoid the lottery

Monetary integration between the Israeli, Jordanian and Palestinian economies

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Inflation and wage indexation with multiperiod contracts

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Precautionary saving and risk aversion: An anticipated utility approach

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