RISK SHARING WITH LIMITED COMMITMENT AND PREFERENCE HETEROGENEITY: STRUCTURAL ESTIMATION AND TESTING

• 成果类型: Article
• 署名作者: Laczo, Sarolta
• 署名单位: Consejo Superior de Investigaciones Cientificas (CSIC); CSIC - Institut d'Analisi Economica (IAE); Barcelona School of Economics
• 刊物名称: JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
• ISSN/ISSBN: 1542-4766
• DOI: 10.1111/jeea.12115
• 发表日期: 2015
• 页码: 265-292
• 关键词: consumption inequality; financial constraints; insurance; income; MODEL; INFORMATION; likelihood; aversion; WEALTH

摘要

In order to analyze the role of limited commitment and preference heterogeneity in explaining the consumption allocation, I propose a theoretical and empirical framework to estimate and evaluate a risk-sharing model where insurance transfers have to be self-enforcing and the coefficient of relative risk aversion may depend on observable household characteristics. I compare this model to benchmark models with full commitment and/or without preference heterogeneity using data from three Indian villages. I find that the limited commitment model with heterogeneous preferences outperforms the benchmark models in a statistical sense and in terms of (i) explaining the dynamic response of consumption to idiosyncratic income shocks, (ii) accounting for the variation of consumption unexplained by household and time effects, and (iii) capturing the variation of inequality across time and villages and predicting changes in inequality. I also use the estimated models to predict the effects of a counterfactual tax and transfer policy on the consumption allocation. The limited commitment model with preference heterogeneity predicts larger benefits to the poor than its homogeneous counterpart. (JEL: C52, D10, D52)