Uninsurable Investment Risks
نویسنده
چکیده
This paper studies a general equilibrium economy in which agents have the ability to invest in a risky technology. The investment risk cannot be fully insured with optimal contracts because shocks are private information. The consideration of these risks changes two of the main conclusions reached in previous studies. First, a positive tax on capital may not be optimal in the long run. Second, the unavailability of state-contingent (optimal) contracts has substantial macroeconomic and welfare consequences.
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