The Limits to Local Insurance

Johannes Gierlinger; P. Milán

The Limits to Local Insurance

Johannes Gierlinger, P. Milán

Universidad Carlos III de Madrid

Research output: Working paper

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Abstract

We study decentralized insurance when multiple risks are payoff-relevant, but each agent may only trade a (possibly different) subset of risks. Unless (at least) one agent can trade every risk, insurance markets remain incomplete, and the economy is not resilient to worst-case events. We also identify spill overs in any feasible allocation: others’ inability to trade some risks restricts an agent’s resilience to joint realizations. Unless an agent can trade a superset of i’s risks, agent i is not resilient to them. In an application, we model constraints as risk-sharing networks and measure resilience in a Malawian village.

Original language	English
Publisher	BSE Working Papers
Pages	1-59
Number of pages	59
Publication status	Published - 25 Aug 2022

Publication series

Name	BSE Working Paper
No.	1293

Keywords

Networks
Market structure
Incomplete markets
Risk sharing

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https://bse.eu/research/working-papers/limits-local-insuranceLicence: C In Copyright

ELECCION SOCIAL, REDES Y BIENESTAR: TEORIA Y APLICACIONES
Massó, J. (Principal Investigator), Barberà, S. (Collaborator), Sancho, F. (Collaborator), Guerra Hernandez, A. I. (Investigator), Milán Solé, P. (Investigator), Vila Carnicero, F. J. (Investigator), Payró, F. (Collaborator), Lleonart Anguix, M. (Collaborator), Chatterji, S. (Collaborator), Bramuelle, Y. (Collaborator) & Rojas Duenas, L. E. (Collaborator)
1/09/21 → 31/08/24
Project: Research Projects and Other Grants

Cite this

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The Limits to Local Insurance

Abstract

Publication series

Keywords

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ELECCION SOCIAL, REDES Y BIENESTAR: TEORIA Y APLICACIONES

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