Insurance and Inequality With Persistent Private Information

• 成果类型: Article
• 署名作者: Bloedel, Alexander W.; Krishna, R. Vijay; Leukhina, Oksana
• 署名单位: University of California System; University of California Los Angeles; State University System of Florida; Florida State University; Federal Reserve System - USA
• 刊物名称: ECONOMETRICA
• ISSN/ISSBN: 0012-9682
• DOI: 10.3982/ECTA20404
• 发表日期: 2025
• 页码: 821-857
• 关键词: Dynamic mechanism design; repeated moral hazard; efficient allocations; Hidden income; RISK-BEARING; consumption; taxation; MODEL; earnings; MARKETS

摘要

We study the implications of optimal insurance provision for long-run welfare and inequality in economies with persistent private information. A principal insures an agent whose private type follows an ergodic, finite-state Markov chain. The optimal contract always induces immiseration: the agent's consumption and utility decrease without bound. Under positive serial correlation, it also backloads high-powered incentives: the sensitivity of the agent's utility with respect to his reports increases without bound. These results extend-and help elucidate the limits of-the hallmark immiseration results for economies with i.i.d. private information. Numerically, we find that persistence yields faster immiseration, higher inequality, and novel short-run distortions. Our analysis uses recursive methods for contracting with persistent types and allows for binding global incentive constraints.