In this paper we quantitatively investigate the implications of a model of consumption risk sharing where infinitely-lived households are subject to exogenous idiosyncratic shocks to their earnings, and where the realization of these shocks are private information. Our theoretical contribution...

In this paper, we study consumption risk sharing when individual income shocks are persistent and not publicly observable, and individuals can default on contracts at the price of financial autarky. We find that, in contrast to a model where the only friction is limited enforcement, our model...