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

  • Femminis, Gianluca

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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2264.

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Date of creation: Oct 1999
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Handle: RePEc:cpr:ceprdp:2264
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  1. Barro, Robert J. & Lee, Jong-Wha, 1994. "Sources of economic growth," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 40(1), pages 1-46, June.
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