An Alternative Unifying Measure of Welfare Gains from Risk-Sharing

Auffret, Philippe

World Bank, Washington, DC

关键词: AGGREGATE CONSUMPTION;    BUSINESS CYCLE;    CONDITIONAL CONVERGENCE;    CONSUMER PREFERENCES;    CONSUMPTION GROWTH;   

DOI  :  10.1596/1813-9450-2676
RP-ID  :  WPS2676

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

Following Lucas's (1987) standardapproach, welfare gains from international risk-sharing havebeen measured as the percentage increase in consumptionlevels that leaves individuals indifferent between, autarkyand risk-sharing. The author proposes to measure welfaregains as the increase in consumption growth, instead ofconsumption levels. When the consumption process isnon-stationary, the author's proposed measure hasseveral attractive features: it does not depend on thehorizon, and it is robust to alternative specifications ofthe consumption stochastic processes (from geometricBrownian processes, to Orstein-Ulhenbeck mean-revertingprocesses), and preferences (from constant relative riskaversion preferences to Kreps-Porteus preferences). Theauthor then uses this measure to estimate potential welfaregains from international risk-sharing for a representativeU.S. consumer. The author finds that if internationalrisk-sharing leads only to a complete elimination ofaggregate consumption volatility (with no impact onconsumption growth), it represents gains to a U.S. consumerof only $ 12 a year on average. But if internationalrisk-sharing also permits an increase in consumption growth,it may have a sizable impact on welfare. Each 0.5 percentagepoint increase in consumption growth, represents gains to aU.S. consumer of about $ 160 a year on average.