This paper empirically examines the behavioral precautionary saving hypothesis by Koszegi and Rabin (2009) stating that uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss...

Can behavioral biases explain why individuals purchase little long-term care insurance, and do so late in life? I consider individuals whose propensity to take risks decreases when old. Unaware of their changing taste for risk, naifs delay the purchase of long-term care insurance, although this...

This paper empirically examines the behavioral precautionary saving hypothesis by Koszegi and Rabin (2009) stating that uncertainty about future income triggers saving because of loss aversion. We extend their theoretical analysis to also consider the internal margin, i.e., the strength, of loss...

This paper empirically examines the behavioral precautionary saving hypothesis that uncertainty about future income triggers an increase in saving because of loss aversion. Guided by the theoretical model of Koszegi and Rabin (2009), we first extend their theoretical analysis to also consider...

Radon exposure in homes is a leading cause of lung cancer, but the rate at which householders test for it is low. In a pre-registered experiment with a nationally representative sample of adults (N = 1,700), we used psychological theory to design interventions to increase perceived risk from...

This paper investigates risk preference at older ages in 14 European countries. Older individuals report greater risk aversion. Using the longitudinal nature of the data we are able to show this relationship between risk preferences and age is not due to cohort effects or selective mortality. We...

We compile, generalize and extend the results about the comparative static effects of risk changes on optimal risk-reduction and saving behavior. We use the time-separable discounted expected-utility model and consider income risk, inflation risk, and interest rate risk. For each type of risk,...

Former theoretical and empirical studies find that precautionary savings are reduced inthe presence of social security systems. The saving motive, however, does not change:individuals respond to increasing income risk by increasing their savings. Although thisstill holds for common tax and...

In his pivotal contributions during the marginal revolution, Leon Walras along with W.S. Jevons assigned subjective utility directly to commodities (goods and services) as, in effect, a simplifying assumption — an assumption destined to become the keystone of neoclassical economics. But this...

It is well known that the implicit insurance provided by labor income taxes can reduce total saving. We show that this insurance can change the composition of saving as well because the reduction in labor-income risk may affect the amount of financial risk that an individual chooses to bear....