Informal Risk Sharing with Local Information

Attila Ambrus, Wayne Gao, P. Milán

Producció científica: Contribució a una revistaArticleRecercaAvaluat per experts

3 Cites (Scopus)


This paper considers the effect of contracting limitations in risk-sharing networks, arising
for example from observability, verifiability, complexity or cultural constraints. We derive necessary and sufficient conditions for Pareto efficiency under these constraints in a general setting, and we provide an explicit characterization of Pareto efficient bilateral
transfer profiles under CARA utility and normally distributed endowments. Our model predicts that network centrality is positively correlated with consumption volatility, as more central agents become quasi-insurance providers to more peripheral agents. The proposed
framework has important implications for the empirical specification of risk-sharing tests, allowing for local risk-sharing groups that overlap within the village network.
Idioma originalEnglish
Pàgines (de-a)2329-2380
RevistaReview of Economic Studies
Estat de la publicacióPublicada - d’oct. 2022


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