In this paper we study the neoclassical growth model with idiosyncratic income risk and aggregate risk in which risk sharing is endogenously constrained by one-sided limited commitment. Households can trade a full set of contingent claims that pay off depending on both idiosyncratic and...

We first study growth and risk sharing in a stochastic growth model with preference shocks and two risk-averse agents. In periods in which one of the agents needs extra consumption (insurance), it is socially optimal to reduce the consumption of the other agent (redistribution) and also to...

Assuming that an individual's rank in the wealth distribution is the only factor determining the individual's wellbeing, we analyze the individual's risk preferences in relation to gaining or losing rank, rather than the individual's risk preferences towards gaining or losing absolute wealth. We...