Risk Sharing and Growth in the Gifts Economy
AbstractWe consider a two-period overlapping generations model where agents face the uncertainty of intergenerational transfers from their children. To avoid this kind of risk, agents have an incentive to share the risk within the same generation. However, there exists an information asymmetry about the realization of the old periodfs income between the insurance company and old agents. By analyzing economies with and without risk sharing, we find that risk sharing decreases the rate of economic growth and accelerates social welfare when the rate of social time preference is sufficiently large.
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Bibliographic InfoPaper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-02.
Length: 29 pages
Date of creation: Feb 2007
Date of revision:
gifts economy; risk sharing; information asymmetry; economic growth; overlapping generations;
Find related papers by JEL classification:
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
- O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-02-10 (All new papers)
- NEP-DGE-2007-02-10 (Dynamic General Equilibrium)
- NEP-IAS-2007-02-10 (Insurance Economics)
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