Deposit Insurance Without Commitment: Wall St. Versus Main St

27 Pages Posted: 31 Jan 2011 Last revised: 3 Feb 2011

See all articles by Russell Cooper

Russell Cooper

University of Texas at Austin - Department of Economics; National Bureau of Economic Research (NBER)

Hubert Kempf

Ecole Normale Superieure de Cachan (ENS)

Date Written: January 2011

Abstract

This paper studies the provision of deposit insurance without commitment in an economy with heterogenous households. When households are identical, deposit insurance will be provided ex post to reap insurance gains. But the ex post provision of deposit insurance redistributes consumption when households differ in their claims on the banking system as well as in their tax obligations to finance the deposit insurance. Deposit insurance will not be provided ex post if it requires a (socially) undesirable redistribution of consumption which outweighs insurance gains.

Suggested Citation

Cooper, Russell W. and Kempf, Hubert, Deposit Insurance Without Commitment: Wall St. Versus Main St (January 2011). NBER Working Paper No. w16752. Available at SSRN: https://ssrn.com/abstract=1751450

Russell W. Cooper (Contact Author)

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Hubert Kempf

Ecole Normale Superieure de Cachan (ENS) ( email )

61 avenue du président Wilson
Cachan, Paris 94235
France

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