Growth and Risk-Sharing with Private Information

FRB of Philadelphia Working Paper No. 99-12

Posted: 24 Feb 2000

See all articles by Aubhik Khan

Aubhik Khan

Ohio State University (OSU)

B. Ravikumar

Federal Reserve Bank of Saint Louis

Date Written: September 1999

Abstract

The author examines the impact of incomplete risk-sharing on growth and welfare. The source of market incompleteness in the economy is private information: a household's idiosyncratic productivity shock is not observable by others. Risk-sharing between households occurs through long-term contracts with intermediaries. The author finds that incomplete risk-sharing tends to reduce the rate of growth relative to the complete risk-sharing benchmark. Numerical examples indicate that the welfare cost and the growth effect of private information are small.

JEL Classification: E20, O16

Suggested Citation

Khan, Aubhik and Ravikumar, B., Growth and Risk-Sharing with Private Information (September 1999). FRB of Philadelphia Working Paper No. 99-12. Available at SSRN: https://ssrn.com/abstract=190430

Aubhik Khan (Contact Author)

Ohio State University (OSU) ( email )

2120 Fyffe Road
Columbus, OH OH 43210
United States

B. Ravikumar

Federal Reserve Bank of Saint Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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