Consumption risk sharing with private information and limited enforcement

0475607 - NHÚ 2018 RIV US eng J - Journal Article
Broer, T. - Kapička, Marek - Klein, P.
Consumption risk sharing with private information and limited enforcement.
Review of Economic Dynamics. Roč. 23, January (2017), s. 170-190. ISSN 1094-2025. E-ISSN 1096-6099
Institutional support: RVO:67985998
Keywords : consumption insurance * private information * limited enforcement
OECD category: Economic Theory
Impact factor: 1.620, year: 2017

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) selfinsurance 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.
Permanent Link: http://hdl.handle.net/11104/0272283