The Wrong Shape of Insurance? What Cross-Sectional Distributions Tell Us about Models of Consumption Smoothing

2013 ◽  
Vol 5 (4) ◽  
pp. 107-140 ◽  
Author(s):  
Tobias Broer
Keyword(s):  
Risk Sharing ◽  
Limited Commitment ◽  
Cross Sectional ◽  
Joint Distributions ◽  
Insurance Contracts ◽  
Moment Measures ◽  
Method Of Moments Estimation ◽  
Estimated Risk ◽  
Standard Models ◽  
Insurance Model

This paper shows how two standard models of consumption risk-sharing—self-insurance through borrowing and saving and limited commitment to insurance contracts—replicate similarly well the standard, second-moment measures of insurance observed in US micro data. A nonparametric analysis, however, reveals strongly contrasting and counterfactual joint distributions of consumption, income and wealth. Method of moments estimation shows how measurement error in consumption eliminates excessive skewness and smoothness of consumption growth. Moreover, counterfactual nonlinearities disappear at high-estimated risk aversion under self-insurance, but are a robust feature of limited commitment. Its “shape of insurance” thus argues in favor of the self-insurance model. (JEL D14, D81, D91, G22, E21)

The distributional structure of finite moving-average processes

1988 ◽  
Vol 25 (02) ◽  
pp. 313-321 ◽  
Author(s):  
ED McKenzie
Keyword(s):  
Moving Average ◽  
Markov Property ◽  
Covariance Structure ◽  
Time Reversibility ◽  
Linear Processes ◽  
Joint Distributions ◽  
Moving Average Processes ◽  
Standard Models ◽  
Non Gaussian ◽  
Analysis Of Time Series

Analysis of time-series models has, in the past, concentrated mainly on second-order properties, i.e. the covariance structure. Recent interest in non-Gaussian and non-linear processes has necessitated exploration of more general properties, even for standard models. We demonstrate that the powerful Markov property which greatly simplifies the distributional structure of finite autoregressions has an analogue in the (non-Markovian) finite moving-average processes. In fact, all the joint distributions of samples of a qth-order moving average may be constructed from only the (q + 1)th-order distribution. The usefulness of this result is illustrated by references to three areas of application: time-reversibility; asymptotic behaviour; and sums and associated point and count processes. Generalizations of the result are also considered.

scholarly journals EFFICIENCY IN LARGE DYNAMIC PANEL MODELS WITH COMMON FACTORS

2014 ◽  
Vol 30 (5) ◽  
pp. 961-1020 ◽  
Author(s):  
Patrick Gagliardini ◽  
Christian Gourieroux
Keyword(s):  
Likelihood Function ◽  
Solvency Ii ◽  
Efficient Estimation ◽  
Dynamic Panel ◽  
Cross Sectional ◽  
Panel Models ◽  
Insurance Contracts ◽  
Credit Risk Analysis ◽  
Asymptotically Efficient ◽  
Dynamic Panel Models

This paper deals with asymptotically efficient estimation in exchangeable nonlinear dynamic panel models with common unobservable factors. These models are relevant for applications to large portfolios of credits, corporate bonds, or life insurance contracts. For instance, the Asymptotic Risk Factor (ARF) model is recommended in the current regulation in Finance (Basel II and Basel III) and Insurance (Solvency II) for risk prediction and computation of the required capital. The specification accounts for both micro- and macrodynamics, induced by the lagged individual observations and the common stochastic factors, respectively. For large cross-sectional and time dimensionsnandT, we derive the efficiency bound and introduce computationally simple efficient estimators for both the micro- and macroparameters. The results are based on an asymptotic expansion of the log-likelihood function in powers of 1/n, and are linked to granularity theory. The results are illustrated with the stochastic migration model for credit risk analysis.

scholarly journals The relationship between medications and estimated risk of breast cancer using Gail Model in women living in southeastern Iran

2019 ◽  
Author(s):  
Nilofar Ghavami ◽  
Hossein Ansari ◽  
Malihe Gharibi ◽  
Kourosh Tirgarfakheri ◽  
Ali Yousefzadeh
Keyword(s):  
Breast Cancer ◽  
Predictive Factors ◽  
Reproductive Factors ◽  
Final Analysis ◽  
Cross Sectional Study ◽  
Gail Model ◽  
Self Medication ◽  
Cross Sectional ◽  
Contraceptive Pills ◽  
Estimated Risk

Background and purpose: Breast cancer is one of the most common cancers in women all over the world. The death rate of this cancer is also increasing. It seems that medication is related to this cancer. The present study aimed at estimating the risk of this cancer using Gail Model and its relationship with medication in women. Materials and Methods: In this cross-sectional study, 260 35-year-old women were selected from healthcare centers in Zahedan. The data were collected using interview and questionnaire. The risk of breast cancer was estimated by Gail Model. The medication conditions were estimated by interviewing the employees in healthcare center. The data were analyzed using independent sample t-test and linear regression. Results: The average age of women was 49.3±8.3 years old with five-year risk, and the lifetime of breast cancer were 0.37±0.24 and 5.5±0.79 percent, respectively. Self-medication (P=0.043) and medication (p=0.035) had a significant relationship with estimated risk of breast cancer. Conclusion: The risk of breast cancer in women can be influenced by medication along with socioeconomic and menstrual-reproductive factors and variables, such as ethnicity, body mass index, education, age, marriage age, nursing period, and menstrual age. The final analysis showed that consuming contraceptive pills, painkillers, and anti-inflammatory pills are the most important predictive factors in 5-year risk with cancer based on Gail Model. On the other hand, consuming painkillers and contraceptive pills were found to be the most important predictive factors in lifetime risk with cancer based on Gail Model.

scholarly journals Risk Sharing under Limited Commitment

2007 ◽  
Author(s):  
Eva Carceles-Poveda ◽  
Arpad Abraham
Keyword(s):  
Risk Sharing ◽  
Limited Commitment

scholarly journals Cohort risk sharing in Pakistan: Relative wage and consumption movements over time

2020 ◽  
Vol 4 (1) ◽  
pp. 77-96
Author(s):  
Syed Hassan Raza
Keyword(s):  
Risk Sharing ◽  
Consumption Smoothing ◽  
University Education ◽  
Relative Wage ◽  
Birth Cohorts ◽  
Cross Sectional ◽  
Education Group ◽  
The University ◽  
Education Groups ◽  
Synthetic Panel

This study analyzes to which extent the distribution of consumption is affected by the relative wage movement among birth cohorts and education groups. Our empirical design is based on a synthetic panel constructed using repeated cross-sectional data from “Household Integrated Economic Survey of Pakistan.” We limit our analysis to persons aged between 26 to 50 years at the time of survey. To see the evolution of change in income and consumption we measured growth by taking 6, 8- and 10-years’ difference respectively. The findings ascertained there is limited risk-sharing across cohort-education groups in Pakistan, but the measured extent of risk-sharing increases over longer horizons. Furthermore, we observe relatively higher consumption smoothing among the less educated people over the period of ten years. In the university education group, results reveal less consumption smoothing in the shorter, six- and eight-year time periods.  The study concludes that the relative risk-sharing over a decade is better in Pakistan than the shorter growth horizon.

scholarly journals Earnings growth and the wealth distribution

2021 ◽  
Vol 118 (15) ◽  
pp. e2025368118
Author(s):  
Thomas J. Sargent ◽  
Neng Wang ◽  
Jinqiang Yang
Keyword(s):  
Interest Rate ◽  
Wealth Distribution ◽  
Power Laws ◽  
Rate Of Return ◽  
Cross Sectional ◽  
Earnings Growth ◽  
Gini Coefficients ◽  
Joint Distributions ◽  
Labor Earnings ◽  
Saving Decisions

As measured by Gini coefficients, fractile inequalities, and tail power laws, wealth is distributed less equally across people than are labor earnings. We study how luck, attitudes that shape saving decisions, and growth rates of labor earnings balance each other in ways that simultaneously shape joint distributions across people of labor earnings, age, and wealth together with an equilibrium rate of return on savings that plays a pivotal role in balancing contending forces. Strong motives for people to save and for firms to demand capital raise an equilibrium interest rate enough to make wealth grow faster than labor earnings. That makes cross-sectional wealth more unevenly distributed and have a fatter tail than labor earnings, as in US data.

RISK SHOCKS, RISK MANAGEMENT, AND INVESTMENT

2019 ◽  
pp. 1-31
Author(s):  
Jonathan Goldberg
Keyword(s):  
Incomplete Markets ◽  
Risk Sharing ◽  
Idiosyncratic Risk ◽  
Limited Commitment ◽  
Business Risk ◽  
Financial Contracts ◽  
Business Outcomes ◽  
Credit Lines ◽  
Aggregate Investment ◽  
State Capital

This paper studies the macroeconomic effects of shocks to idiosyncratic business risk in an economy with endogenously incomplete markets. I develop a model in which firms face idiosyncratic risk and obtain insurance from intermediaries through contracts akin to credit lines. Insurance is imperfect due to limited commitment in financial contracts. Although steady-state capital is higher than if firms were constrained to issue only standard equity, a rise in uncertainty about idiosyncratic business outcomes leads to an endogenous reduction in risk sharing. This deterioration in risk sharing results from a general-equilibrium shortage of pledgeable assets and implies that the economy’s response to an increase in idiosyncratic business risk can be amplified by financial contracting rather than dampened. In a parametrized version of the model, a rise in idiosyncratic business risk generates a large increase in uncertainty about aggregate investment.

scholarly journals Household Sharing and Commitment: Evidence from Panel Data on Individual Expenditures and Time Use

2018 ◽  
Vol 86 (5) ◽  
pp. 2184-2219 ◽  
Author(s):  
Jeremy Lise ◽  
Ken Yamada
Keyword(s):  
Panel Data ◽  
Time Use ◽  
Private Consumption ◽  
Production Cross ◽  
Limited Commitment ◽  
Cross Sectional ◽  
Consumption Expenditures ◽  
Wage Profiles ◽  
Market Production ◽  
Husband And Wife

Abstract In this article, we analyse the dynamics of intra-household allocations using unique panel data on individual-specific consumption expenditures and time used for leisure, market production, and home production. Cross-sectional differences at the time of marriage in expected wage profiles between a husband and wife strongly affect the allocation of private consumption expenditures and time use by households in the cross section. There are substantial gender asymmetries in these allocations. Even for households where the husband and wife have identical wages, the private consumption expenditures for the wife are about half those for the husband. Within a given household over time, shocks to wages lead households to shift the relative weights in favour of the spouse receiving the favourable shock. Additionally, we find that households adjust the weights in response to large but not to small shocks; the adjustment to the weights is twice as large in the year leading up to a divorce; and adjustments are more frequent in dual- than in single-earner households. We interpret the data using a dynamic collective model of the household with potentially limited commitment.

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