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Jeffrey R. Brown

Bio: Jeffrey R. Brown is an academic researcher from University of Illinois at Urbana–Champaign. The author has contributed to research in topics: Pension & Social security. The author has an hindex of 49, co-authored 200 publications receiving 9846 citations. Previous affiliations of Jeffrey R. Brown include National Bureau of Economic Research & Duke University.


Papers
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Journal ArticleDOI
TL;DR: In this paper, the authors provide empirical evidence on how Internet comparison shopping sites affected the prices of life insurance in the 1990s, and suggest that the growth of the Internet has reduced term life prices by 8-15 percent.
Abstract: The Internet may significantly reduce search costs by enabling price comparisons on‐line. This paper provides empirical evidence on how Internet comparison shopping sites affected the prices of life insurance in the 1990s. With micro data on individual insurance policies and with individual and policy characteristics controlled for, hedonic‐type regressions show that increases in Internet use significantly reduced the price of term life insurance. Further evidence shows that prices did not fall with rising Internet usage in the period before the sites began, nor for insurance types that were not covered on the sites. The results suggest that the growth of the Internet has reduced term life prices by 8–15 percent. The results also show that the initial introduction of the Internet search sites is initially associated with an increase in price dispersion within demographic groups, but as use spreads, the dispersion falls.

604 citations

Journal ArticleDOI
TL;DR: In this paper, the authors present new information on the expected present discounted value of payouts on individual life annuities, and find that the expected discount has increased over the last decade relative to the initial cost of the annuity.
Abstract: This paper presents new information on the expected present discounted value of payouts on individual life annuities. The annuity we examine is the single premium immediate life annuity, an insurance product that pays out a nominal level sum as long as the covered person lives, in exchange for an initial lump-sum premium. This annuity offers protection against the risk of someone outliving his saving, given uncertainty about longevity. For reasonable estimates of behavioral parameters, we calculate that individual annuities are currently priced so that retirees without bequest motives should find these policies of substantial value in configuring their portfolios to smooth retirement consumption. We also find that the expected present discounted value of payouts, relative to the initial cost of the annuity, has increased over the last decade. These findings bear on the policy debate regarding the role of individual choice and self-reliance in retirement planning.

585 citations

Book
01 May 1990
TL;DR: The Tax Policy and Economy series as discussed by the authors presents new research bearing on the effects of taxation on economic performance and analyzing the potential effects of potential tax reforms, as well as new research results are presented in a timely and accessible fashion.
Abstract: The Tax Policy and Economy series presents new research bearing on the effects of taxation on economic performance and analyzing the effects of potential tax reforms. Research results are, presented in a timely and accessible fashion.Volume 4 includes contributions by Glenn Hubbard, Lawrence Goulder, Lawrence Summers, Daniel Feenberg, and Eytan Sheshinski.Lawrence H. Summers is Professor of Economics at Harvard University and Research Associate at the National Bureau of Economic Research.

578 citations

Journal ArticleDOI
TL;DR: This article established a causal relation between an individual's decision of whether to own stocks and average stock market participation decision of the individual's community, and showed that the results are stronger in more sociable communities.
Abstract: This paper establishes a causal relation between an individual's decision of whether to own stocks and average stock market participation decision of the individual's community. We instrument for the average ownership of an individual's community with lagged average ownership of the states in which one's non-native neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-by-year effects, rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities.

532 citations

Journal ArticleDOI
TL;DR: This paper established a causal relation between an individual's decision whether to own stocks and average stock market participation of the individual's community and showed that the results are stronger in more sociable communities.
Abstract: This paper establishes a causal relation between an individual’s decision whether to own stocks and average stock market participation of the individual’s community. We instrument for the average ownership of an individual’s community with lagged average ownership of the states in which one’s nonnative neighbors were born. Combining this instrumental variables approach with controls for individual and community fixed effects, a broad set of time-varying individual and community controls, and state-year effects rules out alternative explanations. To further establish that word-of-mouth communication drives this causal effect, we show that the results are stronger in more sociable communities. STANDARD MODELS OF PORTFOLIO CHOICE typically assume that fully informed investors make rational asset allocation decisions to maximize lifetime utility. As Ellison and Fudenberg (1995 P. 93) note, however, “economic agents must often make decisions without knowing the costs and benefits of the possible choices” and thus often “rely on whatever information they have obtained via causal word-of-mouth communication.” Given the evidence that average U.S. citizens have limited investment knowledge, 1 might individuals make portfolio choice

455 citations


Cited by
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Journal ArticleDOI
TL;DR: Kahneman as mentioned in this paper made a statement based on worked out together with Shane Federik the quirkiness of human judgment, which was later used in his speech at the Nobel Prize in economics.
Abstract: Daniel Kahneman received the Nobel Prize in economics sciences in 2002, December 8, Stockholm, Sweden. This article is the edited version of his Nobel Prize lecture. The author comes back to the problems he has studied with the late Amos Tversky and to debates conducting for several decades already. The statement is based on worked out together with Shane Federik the quirkiness of human judgment. Language: ru

4,462 citations

Journal ArticleDOI
TL;DR: An assessment of a rapidly growing body of economic research on financial literacy and thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy are offered.
Abstract: This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision-making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.

2,176 citations

Journal ArticleDOI
TL;DR: In this article, the authors identify the effect of social capital on financial development by exploiting social capital differences within Italy and find that households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit.
Abstract: To identify the effect of social capital on financial development, we exploit social capital differences within Italy. In high-social-capital areas, households are more likely to use checks, invest less in cash and more in stock, have higher access to institutional credit, and make less use of informal credit. The effect of social capital is stronger where legal enforcement is weaker and among less educated people. These results are not driven by omitted environmental variables, since we show that the behavior of movers is still affected by the level of social capital of the province where they were born.

1,895 citations

Journal ArticleDOI
TL;DR: In this article, the authors evaluated the importance of financial literacy by studying its relation to the stock market: are more financially knowledgeable individuals more likely to hold stocks? To assess the direction of causality, they make use of questions measuring financial knowledge before investing in the stock markets.
Abstract: Individuals are increasingly put in charge of their financial security after retirement. Moreover, the supply of complex financial products has increased considerably over the years. However, we still have little or no information about whether individuals have the financial knowledge and skills to navigate this new financial environment. To better understand financial literacy and its relation to financial decision-making, we have devised two special modules for the DNB Household Survey. We have designed questions to measure numeracy and basic knowledge related to the working of inflation and interest rates, as well as questions to measure more advanced financial knowledge related to financial market instruments (stocks, bonds, and mutual funds). We evaluate the importance of financial literacy by studying its relation to the stock market: Are more financially knowledgeable individuals more likely to hold stocks? To assess the direction of causality, we make use of questions measuring financial knowledge before investing in the stock market. We find that, while the understanding of basic economic concepts related to inflation and interest rate compounding is far from perfect, it outperforms the limited knowledge of stocks and bonds, the concept of risk diversification, and the working of financial markets. We also find that the measurement of financial literacy is very sensitive to the wording of survey questions. This provides additional evidence for limited financial knowledge. Finally, we report evidence of an independent effect of financial literacy on stock market participation: Those who have low financial literacy are significantly less likely to invest in stocks.

1,834 citations

Journal ArticleDOI
TL;DR: In this paper, the authors present an assessment of a rapidly growing body of economic research on financial literacy and examine the impact of financial literacy on economic decision-making in the United States and elsewhere.
Abstract: This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research, which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare, as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy. (JEL A20, D14, G11, I20, J26)

1,741 citations