IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Insurance Within the Firm

  • Guiso, Luigi
  • Pistaferri, Luigi
  • Schivardi, Fabiano

The full insurance hypothesis states that shocks to the firm's performance do not affect workers' compensation. In principal-agent models with moral hazard, firms trade off insurance and incentives to induce workers to supply the optimal level of effort. We use a long panel of matched employer-employee data to test the theoretical predictions of principal-agent models of wage determination in a general context where all types of workers, not only CEOs, are present. We allow for both transitory and permanent shocks to firm performance and find that firms are willing to absorb fully transitory fluctuations in productivity but insure workers only partially against permanent shocks. Risk-sharing considerations can account for about 10% of overall earnings variability, the remainder originating in idiosyncratic shocks. Finally, we show that the amount of insurance varies by type of worker and firm in ways that are consistent with principal-agent models but are hard to reconcile with competitive labour market models, with or without frictions.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2793.

in new window

Date of creation: May 2001
Date of revision:
Handle: RePEc:cpr:ceprdp:2793
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is featured on the following reading lists or Wikipedia pages:

  1. Insurance within the Firm (JPE 2005) in ReplicationWiki

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2793. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.