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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Adriano A. Rampini

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May 2016Household Risk Management
with S. Viswanathan: w22293
Households' insurance against shocks to income, health and other non-discretionary expenditures, and asset values (that is, household risk management) is limited, especially for poor households. We argue that a trade-off between intertemporal financing needs and insurance across states explains this basic insurance pattern. In a model with limited enforcement, we show that household risk management is increasing in household net worth and income, incomplete, and precautionary. These results hold in economies with income risk, durable goods and collateral constraints, and durable goods price risk, under quite general conditions and, remarkably, risk aversion is sufficient and prudence is not required. In equilibrium, collateral scarcity results in a lower interest rate, reduced insurance, a...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers onlyInformation about this author at RePEc

 
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