uninsurable wage risk, insurable wage risk, and measurement error.

In this paper, we study the impact on the aggregate economy of changes in individual risk and insurance. To this end, we use the analytical framework developed in Heathcote, Storesletten and Violante (2008). Our main finding is that insurable risk increases TFP by improving the allocation of...

We explore the optimal progressivity of the income tax system in an incomplete-markets model. Agents value private and public consumption and leisure, and are heterogeneous with respect to innate ability, idiosyncratic shock histories, and preferences. This heterogeneity generates a potential...