On Positive Value of Information in Risk Sharing

Arbeitspapier

We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited enforceability. Better public information has two opposite effects. First, it has a detrimental effect on risk sharing by limiting risk-sharing possibilities as emphasized by Hirshleifer (1971). Second, it mitigates the adverse selection problem resulting from private information which improves risk sharing. We find that better public information in developing countries ameliorates risk sharing in both developing and industrial countries.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. 15-074/VI

Classification and Topics

• Classification: Wirtschaft ; Macroeconomics: Consumption; Saving; Wealth ; Personal Income, Wealth, and Their Distributions ; Incomplete Markets
• Subject: Social value of information ; Sovereign risk ; Limited enforcement

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Denderski, Piotr ; Stoltenberg, Christian
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/111753
• Last update: 10.03.2025, 11:43 AM CET