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On The Optimality of Risk-Sharing in Growth Models: The Role of Education

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  • Femminis, Gianluca

Abstract

While the "risk amelioration" literature suggests that risk sharing channels savings into risky but productive technologies and hence favours growth, models focused on precautionary savings reverse this conclusion. We solve, by means of numerical techniques, a model based on human capital accumulation through education, and we find that the increase in precautionary savings makes labour more productive in the goods sector and draws resources from education, which is the "growth leading" activity. Hence, we establish a result favourable to financial integration, even in a model where precautionary savings play an important role.

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  • Femminis, Gianluca, 1999. "On The Optimality of Risk-Sharing in Growth Models: The Role of Education," CEPR Discussion Papers 2264, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2264
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    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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