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Transfer Programs and Consumption under Alternative Insurance Schemes and Liquidity Constraints

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  • Marcelo Bianconi

Abstract

We consider a dynamic allocation problem under alternative insurance and capital market regimes and proper risk aversion separate from intertemporal substitution. We apply the model to study the effect of one-size-fits-all transfers. We find that one-size-fits-all transfers can have different and diametrically opposed qualitative and quantitative effects on consumption, investment, expected growth of output and consumption and the fair price of insurance of the risky technology. The differences depend upon the regime of insurance to the risky technology, the regime of capital markets and the proper separate measures of risk aversion and intertemporal substitution.

Suggested Citation

  • Marcelo Bianconi, 2004. "Transfer Programs and Consumption under Alternative Insurance Schemes and Liquidity Constraints," Discussion Papers Series, Department of Economics, Tufts University 0411, Department of Economics, Tufts University.
    • Handle: RePEc:tuf:tuftec:0411
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    More about this item

    Keywords

    Transfers; insurance; liquidity constraint; intertemporal substitution; risk aversion;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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