TY - JOUR AU - Hosseini,Roozbeh AU - Jones,Larry E. AU - Shourideh,Ali TI - Risk Sharing, Inequality and Fertility JF - National Bureau of Economic Research Working Paper Series VL - No. 15111 PY - 2009 Y2 - June 2009 UR - http://www.nber.org/papers/w15111 L1 - http://www.nber.org/papers/w15111.pdf N1 - Author contact info: Roozbeh Hosseini Department of Economics Arizona State University PO Box 879801 Tempe, AZ 85287-9801 Tel: 480-727-7933 Fax: 480-965-0748 E-Mail: roozbeh.hosseini@asu.edu Larry E. Jones Department of Economics University of Minnesota 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 Tel: 612/624-4553 Fax: 612/624-0209 E-Mail: lej@umn.edu Ali Shourideh Department of Economics University of Minnesota 4-101 Hanson Hall 1925 Fourth Street South Minneapolis, MN 55455 E-Mail: shour004@umn.edu AB - We use an extended Barro-Becker model of endogenous fertility, in which parents are heterogeneous in their labor productivity, to study the efficient degree of consumption inequality in the long run. In our environment a utilitarian planner allows for consumption inequality even when labor productivity is public information. We show that adding private information does not alter this result. We also show that the informationally constrained optimal insurance contract has a resetting property - whenever a family line experiences the highest shock, the continuation utility of each child is reset to a (high) level that is independent of history. This implies that there is a non-trivial, stationary distribution over continuation utilities and there is no mass at misery. The novelty of our approach is that the no-immiseration result is achieved without requiring that the objectives of the planner and the private agents disagree. Because there is no discrepancy between planner and private agents' objectives, the policy implications for implementation of the efficient allocation differ from previous results in the literature. Two examples of these are: 1) estate taxes are positive and 2) there are positive taxes on family size. ER -