Assuming a risk-neutral bank and assuming household utility to be exponential, we show how under information symmetry … the covariance of income and loan repayments may explain higher household borrowings than in the case without default … that in a situation in which a household without default option would neither borrow nor save, the existence of a default …

We show how to use panel data on household consumption to directly estimate households’ risk preferences. Specifically …, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we … then test allowing for this heterogeneity. There is substantial, statistically significant heterogeneity in estimated risk …