Working Paper
Growth and risk-sharing with private information
Abstract: The author examines the impact of incomplete risk-sharing on growth and welfare. The source of market incompleteness in the economy is private information: a household's idiosyncratic productivity shock is not observable by others. Risk-sharing between households occurs through long-term contracts with intermediaries. The author finds that incomplete risk-sharing tends to reduce the rate of growth relative to the complete risk-sharing benchmark. Numerical examples indicate that the welfare cost and the growth effect of private information are small.
Keywords: Economic development; Risk;
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Authors
Bibliographic Information
Provider: Federal Reserve Bank of Philadelphia
Part of Series: Working Papers
Publication Date: 1999
Number: 99-12