Consumption risk sharing with private information and limited enforcement
Number of Authors: 3
2017 (English)In: Review of economic dynamics (Print), ISSN 1094-2025, E-ISSN 1096-6099, Vol. 23, 170-190 p.Article in journal (Refereed) Published
We study consumption risk sharing when individual income shocks are persistent and not publicly observable, and individuals can default on contracts at the price of financial autarky. We find that, in contrast to a model where the only friction is limited enforcement, our model has observable implications that are similar to those of an Aiyagari (1994) self-insurance model and therefore broadly consistent with empirical observations. However, some of the implied effects of changes in policy or the economic environment are noticeably different in our model compared to self-insurance.
Place, publisher, year, edition, pages
2017. Vol. 23, 170-190 p.
Constimption insurance, Private information, Limited enforcement
IdentifiersURN: urn:nbn:se:su:diva-141301DOI: 10.1016/j.red.2016.10.001ISI: 000393732900009OAI: oai:DiVA.org:su-141301DiVA: diva2:1086807