Complete Markets in Italy: An Analysis on Micro Data

Giornale degli Economisti ed Annali di Economia, Vol. 58, No. 1, p. 1-25, April 1999

Posted: 21 Jan 2004

See all articles by Tomaso Duso

Tomaso Duso

German Institute for Economic Research (DIW Berlin); TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization

Abstract

This paper tests the hypothesis of complete markets in a panel of Italian households drawn from the Bank of Italy's Survey of Household Income and Wealth (SHIW). Under the hypothesis that markets are complete and preferences are of the CRRA type, consumption growth is equated across households, and thus it is independent of idiosyncratic variables. I use the difference between realized income and its subjective expectation as the household's idiosyncratic shock, allowing for non-separability between consumption and leisure. Other possible measures for the personal shock are proposed in order to obtain more robust results. For all the proposed specifications the test strongly rejects the null hypothesis of complete markets.

Keywords: Complete Markets, Full Insurance, Subjective Expectations, Italy, Consumption

JEL Classification: D12, D52, G12

Suggested Citation

Duso, Tomaso, Complete Markets in Italy: An Analysis on Micro Data. Giornale degli Economisti ed Annali di Economia, Vol. 58, No. 1, p. 1-25, April 1999. Available at SSRN: https://ssrn.com/abstract=467352

Tomaso Duso (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

TU Berlin- Faculty of Economics and Management - Empirical Industrial Organization ( email )

Berlin, 10585
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
388
PlumX Metrics