Asymmetric Information in Couples

Michele Tertilt and Matthias Doepke

No 606, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: There exists ample evidence for limited risk-sharing between spouses. Previous theoretical work has mostly focused on limited commitment as the friction causing the lack of insurance. Recent evidence from field experiments with married couples in developing countries points to the importance of asymmetric information. In this paper we introduce private information in models of household decision-making and explore its implications for risk-sharing. Different from standard private information models aimed to study social insurance, our household model includes three distinct features. (i) Individual income shocks imply (household) aggregate shocks, (ii) the presence of household public goods, (iii) altruism.

Date: 2015
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