Adverse Selection, Risk Sharing and Business Cycles

Marcelo Veracierto

No WP-2014-10, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: I consider a real business cycle model in which agents have private information about an idiosyncratic shock to their value of leisure. I consider the mechanism design problem for this economy and describe a computational method to solve it. This is an important contribution of the paper since the method could be used to solve a wide class of models with heterogeneous agents and aggregate uncertainty. Calibrating the model to U.S. data I find a striking result: That the information frictions that plague the economy have no effects on business cycle fluctuations.

Keywords: Adverse selection; risk sharing; business cycles; private information; incentives; optimal contracts; computational methods; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: C63 C68 D31 D82 E32 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2014-10-22
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.chicagofed.org/digital_assets/publicati ... s/2014/wp2014_10.pdf Full text (application/pdf)

Related works:
Working Paper: Adverse Selection, Risk Sharing and Business Cycles (2017)
Working Paper: Adverse Selection, Risk Sharing and Business Cycles (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedhwp:wp-2014-10

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of Chicago Contact information at EDIRC.
Bibliographic data for series maintained by Lauren Wiese ().