EconPapers    
Economics at your fingertips  
 

Heterogeneity and Tests of Risk Sharing

Sam Schulhofer-Wohl

Journal of Political Economy, 2011, vol. 119, issue 5, 925 - 958

Abstract: How well do people share risk? Standard risk-sharing regressions assume that any variation in households' risk preferences is uncorrelated with variation in the cyclicality of income. I combine administrative and survey data to show that this assumption is questionable: Risk-tolerant workers hold jobs in which earnings carry more aggregate risk. The correlation makes risk-sharing regressions in the previous literature too pessimistic. I derive techniques that eliminate the bias, apply them to U.S. data, and find that the effect of idiosyncratic income shocks on consumption is practically small and statistically difficult to distinguish from zero.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (31) Track citations by RSS feed

Downloads: (external link)
http://dx.doi.org/10.1086/662720 (application/pdf)
http://dx.doi.org/10.1086/662720 (text/html)
Access to the online full text or PDF requires a subscription.

Related works:
Working Paper: Heterogeneity and tests of risk sharing (2011) Downloads
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:ucp:jpolec:doi:10.1086/662720

Access Statistics for this article

More articles in Journal of Political Economy from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().

 
Page updated 2019-10-18
Handle: RePEc:ucp:jpolec:doi:10.1086/662720