On The Optimality of Risk-Sharing in Growth Models: The Role of Education

Gianluca Femminis

No 2264, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: While the "risk amelioration" literature suggests that risk sharing channels savings into risky but productive technologies and hence favours growth, models focused on precautionary savings reverse this conclusion. We solve, by means of numerical techniques, a model based on human capital accumulation through education, and we find that the increase in precautionary savings makes labour more productive in the goods sector and draws resources from education, which is the "growth leading" activity. Hence, we establish a result favourable to financial integration, even in a model where precautionary savings play an important role.

Keywords: Education; Endogenous Growth; Human Capital; Risk-Sharing (search for similar items in EconPapers)
JEL-codes: F40 O41 (search for similar items in EconPapers)
Date: 1999-10
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