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dc.contributor.authorBROER, Tobias
dc.date.accessioned2009-10-20T13:57:43Z
dc.date.available2009-10-20T13:57:43Z
dc.date.issued2009
dc.identifier.issn1725-6704
dc.identifier.urihttp://hdl.handle.net/1814/12696
dc.description.abstractLimited commitment to contracts can explain imperfect risk sharing even when individuals have access to complete insurance markets. Past contributions have focused on the resulting cross-sectional distribution of consumption (Cordoba 2008, Krueger and Perri 2006). In contrast, this paper looks at the joint dynamics of income, consumption and wealth implied by the asymmetric nature of partial insurance under limited commitment, where negative income shocks are largely insured but positive shocks can lead to large rises in consumption. A theoretical section proves the existence and uniqueness of equilibrium in a limited commitment continuum economy where incomes follow a standard markov process, and solves analytically for the joint equilibrium distribution of consumption, income and wealth. I show that individual consumption follows, at least locally, a left-skewed geometric distribution. Also, the conditional distributions of consumption and wealth are highly non-linear and have a characteristic form of heteroscedasticity, with declining conditional variances as income increases. In a quantitative part, the paper compares the exact distributions in the Krueger and Perri (2006) model to non-parametric estimates of their counterparts in US micro-data, and in a simple Ayagari economy.en
dc.format.mimetypeapplication/pdf
dc.language.isoenen
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2009/39en
dc.rightsinfo:eu-repo/semantics/openAccess
dc.subjectRisk Sharingen
dc.subjectLimited Commitmenten
dc.subjectInequalityen
dc.subjectWealth and Consumption Distributionen
dc.subjectParticipation Constraintsen
dc.subjectDefaulten
dc.subjectD52en
dc.subjectD31en
dc.subjectE21en
dc.subjectE44en
dc.titleStationary Equilibrium Distributions in Economies with Limited Commitmenten
dc.typeWorking Paperen
dc.neeo.contributorBROER|Tobias|aut|
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