Domain-specific risk and public policy / Ohto Kanninen (Labour Institute for Economic Research), Petri Böckerman (University of Jyväskylä, Labour Institute for Economic Research and IZA), Ilpo Suoniemi (Labour Institute for Economic Research) ; IZA Institute of Labor Economics
VerfasserKanninen, Ohto ; Böckerman, Petri ; Suoniemi, Ilpo
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, May 2018
Elektronische Ressource
Umfang1 Online-Ressource (52 Seiten) : Diagramm
SerieDiscussion paper ; no. 11539
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Domain-specific risk and public policy [1.79 mb]
Verfügbarkeit In meiner Bibliothek
Zusammenfassung (Englisch)

We develop a method to estimate domain-specific risk. We apply the method to sickness insurance by fitting a utility function at the individual level, using European survey data on life satisfaction. Three results stand out. First, relative risk aversion increases with income. Second, marginal utility is higher in the sick state conditional on income, due to an observed fixed cost of sickness. Third, the domain-specificity of risk shifts the focus on the smoothing of utility, not consumption. The optimal policy rule implies that the replacement rates should be non-linear and decrease with income.