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Chang-Ming Lee
''Technological advances in self-insurance and self-protection''
( 2015, Vol. 35 No.3 )
This study investigates how technological advances in self-insurance (or self-protection) affect the optimal level of self-insurance (or self-protection) and that of insurance, if insurance is also taken into account. Conditions are derived for determining the signs of changes in the optimal levels of decision variables due to improved technology. Two cross-derivatives are found to be the key factors. Classification of technological advances is suggested based on the two cross-derivatives. The results show that when analyzed pairwise, “neutral” technological advances, according to the classification, decrease the optimal level of self-insurance and that of insurance, but increase the optimal level of self-protection and that of insurance.
Keywords: self-insurance, self-protection, technological advance
JEL: D8 - Information, Knowledge, and Uncertainty: General
D9 - Intertemporal Choice and Growth: General
Manuscript Received : Apr 16 2015 Manuscript Accepted : Jul 11 2015

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