Heterogeneity, Adverse Selection and Valuation with Endogenous Labor Supply

Marcelo Bianconi

No 412, Discussion Papers Series, Department of Economics, Tufts University from Department of Economics, Tufts University

Abstract: This paper considers models of intratemporal consumption-labor choice and intertemporal consumption choice under heterogeneity and private information in preferences towards labor. We show that market regime regarding unemployment insurance is important to determine the effects of heterogeneity and private information on allocations and valuations. There are two main results. First, intertemporal choice can mitigate adverse selection. Second, in countries where unemployment insurance is generous capital markets should have low usage and the risk-free rate of return is low. However, in countries where unemployment insurance is less generous, capital markets should have more usage and the risk-free rate of return is higher.

Keywords: private information; adverse selection; lottery; unemployment insurance; incomplete markets (search for similar items in EconPapers)
JEL-codes: D1 G1 J2 J3 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-mic
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Journal Article: Heterogeneity, adverse selection and valuation with endogenous labor supply (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:tuf:tuftec:0412

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