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Self-Insurance vs. Self-Financing: A Welfare Analysis of the Persistence of Shocks

  • Francisco Buera


  • Yongseok Shin


market frictions over time with self-financing. With intermediate levels of frictions in the capital market, welfare costs of market incompleteness have a U shape against the persistence of idiosyncratic shocks. The right arm of the U reflects the difficulty of self-insurance against very persistent shocks; and the left arm, the difficulty of overcoming capital market frictions through self-financing when entrepreneurial opportunities are short-lived.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1153.

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Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:1153
Contact details of provider: Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA
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