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Private information and aggregate risk sharing

Duncan, Alfred James Michael (2016) Private information and aggregate risk sharing. Discussion paper. University of Glasgow (KAR id:70519)

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Abstract

When individuals have private information about their own luck and income, the sharing of idiosyncratic risks is hampered by moral hazard. This friction also affects the optimal sharing of aggregate risks. Optimal allocations restrict the exposure of low wealth agents’ consumption to business cycle risk. This encourages truth-telling by high wealth agents who have a high tolerance for aggregate risk, thereby increasing the extent to which idiosyncratic risks can be shared. Implementation of these optimal allocations requires restrictions in the trade of securities contingent on aggregate outcomes.

Item Type: Monograph (Discussion paper)
Uncontrolled keywords: Incomplete markets, aggregate risk, distribution
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculties > Social Sciences > School of Economics
Depositing User: Alfred Duncan
Date Deposited: 30 Nov 2018 16:17 UTC
Last Modified: 30 May 2019 08:26 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/70519 (The current URI for this page, for reference purposes)
Duncan, Alfred James Michael: https://orcid.org/0000-0003-1246-9386
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