| The first part of the dissertation examines the role of social attachment and how vital it is for human health and welfare. Recent experimental evidence in humans (Zak et al., 2004; Zak et al., in press) has identified the role of neuroactive hormones, especially the peptide oxytocin, in mediating trusting behaviors. The first chapter of this dissertation tests the endocrinological basis for trust between humans within particular countries. Using 31 measures of biological, social, and environmental factors that are associated with hormone levels for a sample of 41 countries, two classes of factors are found to be related to trust: consumption of plant-based estrogens (phytoestrogens), and the presence of environmental conditions including hormone mimics. These findings provide preliminary evidence that interpersonal trust at the country level may be related to levels of neuroactive hormones.; The second part of the dissertation analyzes the importance of the assumption of complete insurance markets for risk-sharing, focusing particularly on intra-household risk-sharing. In the second chapter, I consider conditions under which intra-household allocations can lead to a Pareto optimal consumption of household goods. Various striking implications for household allocations and consumption are reported. Assuming no credit or other risk-reduction mechanisms, the analysis distinguishes two models of intra-household risk-sharing and takes into account possible adjustment costs. An underlying theme is that the welfare gains from eliminating households' consumption uncertainty depends on the household's members' risk aversion heterogeneity and the combination risk-compensation parameters.; In the third chapter, I ask whether the lack of risk-sharing at the national level, between kinship groups, in a village, or even between and within families can be explained under complete markets by allowing for nonseparabilities in utility of tradables with nontradable household goods. I decentralize the analysis to the household level and build a setting that reconciles the household decision making behavior with the theory on complete markets, thereby providing an improved explanation of risk-sharing at the household level. I test the implications of the complete markets factor structure using data from the PSID and find that nonseparabilities and the aggregation level do not explain the puzzle. |
