scholarly journals RISK SHARING WITH LIMITED COMMITMENT AND PREFERENCE HETEROGENEITY: STRUCTURAL ESTIMATION AND TESTING

2014 ◽  
Vol 13 (2) ◽  
pp. 265-292 ◽  
Author(s):  
Sarolta Laczó
Keyword(s):  
Risk Sharing ◽  
Structural Estimation ◽  
Limited Commitment ◽  
Preference Heterogeneity

The Wrong Shape of Insurance? What Cross-Sectional Distributions Tell Us about Models of Consumption Smoothing

2013 ◽  
Vol 5 (4) ◽  
pp. 107-140 ◽  
Author(s):  
Tobias Broer
Keyword(s):  
Risk Sharing ◽  
Limited Commitment ◽  
Cross Sectional ◽  
Joint Distributions ◽  
Insurance Contracts ◽  
Moment Measures ◽  
Method Of Moments Estimation ◽  
Estimated Risk ◽  
Standard Models ◽  
Insurance Model

This paper shows how two standard models of consumption risk-sharing—self-insurance through borrowing and saving and limited commitment to insurance contracts—replicate similarly well the standard, second-moment measures of insurance observed in US micro data. A nonparametric analysis, however, reveals strongly contrasting and counterfactual joint distributions of consumption, income and wealth. Method of moments estimation shows how measurement error in consumption eliminates excessive skewness and smoothness of consumption growth. Moreover, counterfactual nonlinearities disappear at high-estimated risk aversion under self-insurance, but are a robust feature of limited commitment. Its “shape of insurance” thus argues in favor of the self-insurance model. (JEL D14, D81, D91, G22, E21)

scholarly journals Risk Sharing under Limited Commitment

2007 ◽  
Author(s):  
Eva Carceles-Poveda ◽  
Arpad Abraham
Keyword(s):  
Risk Sharing ◽  
Limited Commitment

RISK SHOCKS, RISK MANAGEMENT, AND INVESTMENT

2019 ◽  
pp. 1-31
Author(s):  
Jonathan Goldberg
Keyword(s):  
Incomplete Markets ◽  
Risk Sharing ◽  
Idiosyncratic Risk ◽  
Limited Commitment ◽  
Business Risk ◽  
Financial Contracts ◽  
Business Outcomes ◽  
Credit Lines ◽  
Aggregate Investment ◽  
State Capital

This paper studies the macroeconomic effects of shocks to idiosyncratic business risk in an economy with endogenously incomplete markets. I develop a model in which firms face idiosyncratic risk and obtain insurance from intermediaries through contracts akin to credit lines. Insurance is imperfect due to limited commitment in financial contracts. Although steady-state capital is higher than if firms were constrained to issue only standard equity, a rise in uncertainty about idiosyncratic business outcomes leads to an endogenous reduction in risk sharing. This deterioration in risk sharing results from a general-equilibrium shortage of pledgeable assets and implies that the economy’s response to an increase in idiosyncratic business risk can be amplified by financial contracting rather than dampened. In a parametrized version of the model, a rise in idiosyncratic business risk generates a large increase in uncertainty about aggregate investment.

scholarly journals Testing Efficient Risk Sharing with Heterogeneous Risk Preferences: Comment

2018 ◽  
Vol 108 (10) ◽  
pp. 3104-3113 ◽  
Author(s):  
Aditya Shrinivas ◽  
Marcel Fafchamps
Keyword(s):  
Risk Sharing ◽  
Risk Preferences ◽  
Preference Heterogeneity ◽  
Test Results ◽  
Heterogeneous Preferences ◽  
Efficiency Test

Mazzocco and Saini (2012) propose and implement a test of efficient risk sharing that allows for preference heterogeneity. They motivate their approach as yielding different results from those of a standard efficiency test with homogeneous preferences. We show that the standard efficiency test results are misreported in their paper and that the correctly reported results do not present as compelling a case for the importance of accounting for heterogeneous preferences. (JEL D12, D81, G22, O12, O18, R23, Z13)

Collateral premia and risk sharing under limited commitment

2010 ◽  
Vol 46 (3) ◽  
pp. 475-501 ◽  
Author(s):  
Weerachart T. Kilenthong
Keyword(s):  
Risk Sharing ◽  
Limited Commitment

scholarly journals Efficient Risk Sharing with Limited Commitment and Storage

2017 ◽  
Vol 85 (3) ◽  
pp. 1389-1424 ◽  
Author(s):  
Árpád Ábrahám ◽  
Sarolta Laczó
Keyword(s):  
Risk Sharing ◽  
Limited Commitment ◽  
And Storage
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