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Transfer Programs and Consumption under Alternative Insurance Schemes and Liquidity Constraints

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  • Marcelo Bianconi

Abstract

We consider a dynamic allocation problem under alternative insurance and capital market regimes and proper risk aversion separate from intertemporal substitution. We apply the model to study the effect of one-size-fits-all transfers. We find that one-size-fits-all transfers can have different and diametrically opposed qualitative and quantitative effects on consumption, investment, expected growth of output and consumption and the fair price of insurance of the risky technology. The differences depend upon the regime of insurance to the risky technology, the regime of capital markets and the proper separate measures of risk aversion and intertemporal substitution.

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Bibliographic Info

Paper provided by Department of Economics, Tufts University in its series Discussion Papers Series, Department of Economics, Tufts University with number 0411.

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Date of creation: 2004
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Handle: RePEc:tuf:tuftec:0411

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Keywords: Transfers; insurance; liquidity constraint; intertemporal substitution; risk aversion;

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  1. Paola Giuliano & Stephen Turnovsky, 2000. "Intertemporal Substitution, Risk Aversion, and Economic Performance in a Stochastically Growing Open Economy," Working Papers 0002, University of Washington, Department of Economics.
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  12. Gertler, Mark & Rogoff, Kenneth, 1990. "North-South lending and endogenous domestic capital market inefficiencies," Journal of Monetary Economics, Elsevier, vol. 26(2), pages 245-266, October.
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  15. Puga, Diego, 2001. "European Regional Policies in Light of Recent Location Theories," CEPR Discussion Papers 2767, C.E.P.R. Discussion Papers.
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