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Growth and risk-sharing with private information

  • Khan, Aubhik
  • Ravikumar, B.

The author examines the impact of incomplete risk-sharing on growth and welfare. The source of market incompleteness in the 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. The author finds 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.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 47 (2001)
Issue (Month): 3 (June)
Pages: 499-521

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Handle: RePEc:eee:moneco:v:47:y:2001:i:3:p:499-521
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