Risk averse agents who engage in risky production activities frequently participate in some sort of arrangement to share risk. When there are issues of moral hazard, optimal risk sharing typically involves spreading risk over time as well as over space. Agents who suffer bad outcomes can spread risk over time by borrowing against future earnings to supplement present consumption. In this paper I analyze the effect that such intertemporal risk sharing has on the distribution of consumption and utility. I find that in most cases intertemporal risk sharing leads to a spreading of the utility weight distribution. Under the optimal contract agents who suffer negative shocks respond by working harder and bearing more risk, exposing them to the likelihood of more negative shocks.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1235.
Length: Date of creation: Nov 1998 Date of revision: Handle: RePEc:nwu:cmsems:1235
Contact details of provider: Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014 Phone: 847/491-3527 Fax: 847/491-2530 Email: Web page: http://www.kellogg.northwestern.edu/research/math/ More information through EDIRC
Order Information: Email:
For technical questions regarding this item, or to correct its listing, contact: (Fran Walker).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)