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Risk Sharing in the Presence of a Public Good

Josef Schroth

Staff Working Papers from Bank of Canada

Abstract: This paper studies an economy where agents can spend resources on consuming a private good and on funding a public good. There is asymmetric information regarding agents’ relative preference for private versus public good consumption. I show how private good consumption should be coordinated across agents within each period to ensure efficient contributions to fund the public good. If agents contributed similar amounts in the past, then coordination takes the form of positively correlated contributions in the current period. If an agent contributed more in the past, then coordination prescribes state-contingent socially wasteful private good consumption in the current period for that agent.

Keywords: Financial stability; Financial system regulation and policies; Fiscal Policy (search for similar items in EconPapers)
JEL-codes: D82 D86 E62 H21 H23 H77 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015
New Economics Papers: this item is included in nep-mac, nep-mic and nep-pub
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:15-27

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