Sharing aggregate risks under moral hazard
AbstractThis paper analyzes the efficient design of insurance schemes in the presence of aggregate shocks and moral hazard. The population is divided into groups, the labour force in different sectors for instance. In each group, individuals are ex ante identical but are subject to idiosyncratic shocks. Without moral hazard, optimality requires (1) full insurance against idiosyncratic shocks, which gives rise to a representative agent for each group and (2) optimal sharing of macro-economic risks between these representative agents. The paper investigates what remains of this analysis when the presence of moral hazard conflicts with the full insurance of idiosyncratic shocks. In particular, how is the sharing of macro-economic risks across groups affected by the partial insurance against idiosyncratic risks? The design of unemployment insurance schemes in different economic sectors, and the design of pension annuities in an unfunded social security system are two potential applications.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series PSE Working Papers with number halshs-00586739.
Date of creation: May 2008
Date of revision:
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00586739
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
moral hazard ; insurance ; mutuality principle ; macro-economic risk;
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Florian Scheuer, 2013.
"Optimal Asset Taxes in Financial Markets with Aggregate Uncertainty,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 16(3), pages 405-420, July.
- Florian Scheuer, 2012. "Optimal Asset Taxes in Financial Markets with Aggregate Uncertainty," NBER Working Papers 17817, National Bureau of Economic Research, Inc.
- Mohamed Belhaj & Renaud Bourlès & Frédéric Deroïan, 2010.
"Moral hazard and risk-sharing: risk-taking as an incentive tool,"
- Mohamed Belhaj & Renaud Bourl?s & Fr?d?ric Dero?an, 2014. "Risk-Taking and Risk-Sharing Incentives under Moral Hazard," American Economic Journal: Microeconomics, American Economic Association, vol. 6(1), pages 58-90, February.
- Costa, Carlos Eugênio da & Luz, Vitor F., 2010. "The Private Memory of Aggregate Shocks," Economics Working Papers (Ensaios Economicos da EPGE) 706, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.