Growth and risk-sharing with private information

Aubhik Khan, B. Ravikumar

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

We examine the impact of incomplete risk-sharing on growth and welfare. The source of market incompleteness in our 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. We find 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.

Original languageEnglish (US)
Pages (from-to)499-521
Number of pages23
JournalJournal of Monetary Economics
Volume47
Issue number3
DOIs
StatePublished - Jun 1 2001

Keywords

  • E20
  • Growth
  • Long-term contracts
  • O16
  • Risk-sharing

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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