1,721,366 research outputs found
Awareness and stock market participation
Full text linkThe paper documents lack of awareness of financial assets in the 1995 and 1998 Bank of Italy Surveys of Household Income and Wealth. It then explores the determinants of awareness, and finds that the probability that survey respondents are aware of stocks, mutual funds and investment accounts is positively correlated with education, household resources, long-term bank relations and proxies for social interaction. Lack of financial awareness has important implications for understanding the stockholding puzzle and for estimating stock market participation costs. Klassifikation: E2, D8, G
Cultural differences and institutional integration
Full text linkIf citizens of different countries belonging to an economic union adhere to different and deeply rooted cultural norms, when these countries interact they may find it impossible to agree on efficient policies, especially in hard times. Political leaders are bound to follow policies that do not violate their country's cultural norms. This paper provides a simple positive theory and a compelling case study of the Euro area crisis to highlight the importance of cultural clashes when economies integrate. We also provide a normative argument about the desirability of institutional integration: a political union, with a common enforcement agency, is the more beneficial the greater is cultural diversity in an economic union
Credit within the firm
Full text linkWe exploit time variation in the degree of development of local credit markets and matched employer-employee data to assess the role of the firm as an internal credit market. In less developed local credit markets firms can offer a flatter wage-tenure profile than firms in more developed credit markets to lend implicitly to their workers or offer a steeper profile to implicitly borrow from their workers. We find that firms located in less financially developed markets offer wages that are lower at the beginning of tenure and grow faster than those offered by firms in more
financially developed markets, helping firms finance their operations by raising funds from workers. Because we control for local market effects and only exploit time variation in the degree of local financial development induced by an exogenous liberalization, the effect we find is unlikely to reflect unobserved local factors that
systematically affect wage tenure profiles. The size of implicit loans is larger for firms with more problematic access to bank credit and workers less likely to face
credit constraints. The amount of credit generated by implicit lending within the firm is economically important and can be as large as 30% of bank lending.
Consistent with credit market imperfections opening up trade opportunities within the firm, we find that the internal rate of return of implicit loans lies between the
rate at which workers savings are remunerated in the market and the rate firms pay on their loans from banks
Background Uncertainty and the Demand for Insurance Against Insurable Risks
No full textTheory suggests that people facing higher uninsurable background risk buy more insurance against other risks that are insurable. This proposition is supported by Italian cross-sectional data. It is shown that the probability of purchasing casualty insurance increases with earnings uncertainty. This finding is consistent with consumer preferences being characterized by decreasing absolute prudence. The Geneva Papers on Risk and Insurance Theory (1998) 23, 7–27. doi:10.1023/A:1008621712979
Risk Aversion, Wealth, and Background Risk
Full text linkWe use household survey data to construct a direct measure of absolute risk aversion based on the maximum price a consumer is willing to pay for a risky security. We relate this measure to consumers.endowments and attributes and to measures of background risk and liquidity constraints. We .nd that risk aversion is a decreasing function of the endowment. thus rejecting CARA preferences. We estimate the elasticity of risk aversion to consumption at about 0.7, below the unitary value predicted by CRRA utility. We also .nd that households. attributes are of little help in predicting their degree of risk aversion, which is characterized by massive unexplained heterogeneity. We show that the consumer.s environment affects risk aversion. Individuals who are more likely to face income uncertainty or to become liquidity constrained exhibit a higher degree of absolute risk aversion, consistent with recent theories of attitudes toward risk in the presence of uninsurable risk
Do Capital Gains Affect Consumption? Estimates of Wealth Effects from Italian Household’s Behavior
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