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| Author: | Cole, H. L. Kocherlakota, N. R. |
| Title: | Efficient Allocations with Hidden Income and Hidden Storage |
| Journal: | Review of Economic Studies
2001 : VOL. 68(3):236, p. 523-542 |
| Index terms: | ALLOCATION INCOMES STORAGE |
| Language: | eng |
| Abstract: | The authors consider an environment in which individuals receive income shocks that are unobservable to others and can privately store resources. The authors provide a simple characterization of the unique efficient allocation of consumption in cases in which the rate of return on storage is sufficiently high or, alternatively, in which the worst possible outcome is sufficiently dire. The authors show that, unlike in environments without unobservable storage, the symmetric efficient allocation of consumption is decentralizable through a competitive asset market in which individuals trade risk-free bonds among themselves. |
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