Self-Insurance vs. Self-Financing: A Welfare Analysis of the Persistence of Shocks

market frictions over time with self-financing. With intermediate levels of frictions in the capital market, welfare costs of market incompleteness have a U shape against the persistence of idiosyncratic shocks. The right arm of the U reflects the difficulty of self-insurance against very persistent shocks; and the left arm, the difficulty of overcoming capital market frictions through self-financing when entrepreneurial opportunities are short-lived.

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Year of publication:	2010
Authors:	Buera, Francisco ; Shin, Yongseok
Institutions:	Society for Economic Dynamics - SED

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Series:	2010 Meeting Papers.
Type of publication:	Book / Working Paper
Notes:	The text is part of a series 2010 SED Meeting Papers Number 1153
Source:	RePEc - Research Papers in Economics

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