Karaivanov, Alexander K.; Martin, Fernando M. - Federal Reserve Bank of St. Louis - 2011
We revisit the role of limited commitment in a dynamic risk-sharing setting with private information. We show that a …. Numerically, we show that Markov-perfect contracts provide sizable insurance, especially at low asset levels, and are able to … explain a significant part of wealth inequality beyond what can be explained by self-insurance. The welfare gains from …