%0 Journal Article
%A Orazio P. Attanasio
%E Nicola Pavoni
%I Econometric Society
%D 2011
%C Oxford, UK
%G English
%@ 0012-9682
%@ 1468-0262
%T RISK SHARING IN PRIVATE INFORMATION MODELS WITH ASSET ACCUMULATION: EXPLAINING THE EXCESS SMOOTHNESS OF CONSUMPTION
%J Econometrica
%V 79
%N 4
%P 1027-1068
%U http://bonn.summon.serialssolutions.com/2.0.0/link/0/eLvHCXMwnR1dj5QwsLm7F02M3xfxg9TkjE9EyleLL4YgG9DdZXOwnvpCCm19Mdx57P1_OwU2rsklxpempANMOtN2ZjofCJ0RqVdYwKmjeMSdQFLutJ7LHKGIp7gUkYoh3nm1jhffozqL10eIzbEw4FZp_ALNLb4WkNqf8l2gt1fKwvDD1S8H6kXBvepUPOMYHTNCZz6eXTtcd6pc4DlxxLyDM2faeUfvQ3CF5IOeDTWWsfjr-DmUWM2Rs3jw_8g-RPcnMRMnI188Qkeyf4zuzFHIwxM0nBfVZ1zlCXhD4GKNN-fFl6TOdFfrhStjucKr8mO2rPBFUec4qaqsxkmablfbpRl-j7Ovm2VSrOELdZ7px1STE1ersqxzKOaBywVOy7XeuTfwwlO0XWR1mjtTAQaHQKS5IwLCeKsikMpE5wvmCsVbv42FoH5HVedJ1frKi0OXtB4PPQH32FyrLKxVkNXmFN3j4Kjf70xAn3iGcCS1ECk7yiQVQcQ4C3hMVOcKrsKIM9dCr2daNVdjwo1GKyp-zLwmS-uEapnKQm-AiM1Up1M3A1gyhh_8ZhiaBFQ0rYix0EJvDRys1d017_gUcnDZS8h6dQB5agi5_-VMRQvZBwyyB9BikUtjonE5-5Nj9uNw1GjhGfKrgd5pIfIvYOmUmB0SEuw0-ob7bp0H0yHEp89vQ_8FujsawcG_-CU62V3fyFfopL3se9uYMWyjRthGjbBNemnbrCXdXnz79BvFdxkD
%X We study testable implications for the dynamics of consumption and income of models in which first-best allocations are not achieved because of a moral hazard problem with hidden saving. We show that in this environment, agents typically achieve more insurance than that obtained under self-insurance with a single asset. Consumption allocations exhibit "excess smoothness," as found and defined by Campbell and Deaton (1989). We argue that excess smoothness, in this context, is equivalent to a violation of the intertemporal budget constraint considered in a Bewley economy (with a single asset). We also show parameterizations of our model in which we can obtain a closedform solution for the efficient insurance contract and where the excess smoothness parameter has a structural interpretation in terms of the severity of the moral hazard problem. We present tests of excess smoothness, applied to U.K. microdata and constructed using techniques proposed by Hansen, Roberds, and Sargent (1991) to test the intertemporal budget constraint. Our theoretical model leads us to interpret them as tests of the market structure faced by economic agents. We also construct a test based on the dynamics of the cross-sectional variances of consumption and income that is, in a precise sense, complementary to that based on Hansen, Roberds, and Sargent (1991) and that allows us to estimate the same structural parameter. The results we report are consistent with the implications of the model and are internally coherent.
%K Consumer research
%K Moral hazard models
%K Spreading risk
%K Self insurance
%K Consumer economics
%K Consumer information
%K Information modeling
%K Budget constraints
%K Euler equations
%K Coefficients
%K Consumption
%K hidden savings
%K excess smoothness
%K private information
%K Economics
%K Mathematics, Interdisciplinary Applications
%K Statistics & Probability
%K Physical Sciences
%K Social Sciences
%K Social Sciences, Mathematical Methods
%K Business & Economics
%K Mathematics
%K Mathematical Methods In Social Sciences
%K Science & Technology
%K Linear inference, regression
%K Applications
%K Special processes (renewal theory, markov renewal processes, semi-markov processes, statistical mechanics type models, applications)
%K Insurance, economics, finance
%K Exact sciences and technology
%K Probability theory and stochastic processes
%K Probability and statistics
%K Statistics
%K Biology, psychology, social sciences
%K Sciences and techniques of general use
%K Insurance policies
%K Models
%K Consumption
%K LIFE-CYCLE
%K excess smoothness
%K private information
%K INEQUALITY
%K PERMANENT INCOME HYPOTHESIS
%K INSURANCE
%K EFFICIENT ALLOCATIONS
%K FORMULATION
%K MORAL HAZARD
%K GROWTH
%K hidden savings
%K OPTIMAL TAXATION
%K TIME-SERIES
%K Market structure
%K Covariance analysis
%K Finance
%K Parameterization
%K Economic sciences
%K Variance analysis
%K Variance
%K Statistical method
%K Statistical regression
%K Risk model
%K Economy
%K Theoretical model
%K Insurance
%K Cross sectional study
%K Environment
%K Econometrics