This paper investigates the importance of market incompleteness by comparing the rates of risk aversion estimated from complete and incomplete markets environments. For the incomplete-markets case, we use consumption data for 50 U.S. states. While the use of state-level data is conceptually...

Extant estimates of the welfare cost of business cycles suggest that this cost is quite low and might well be minuscule. Those estimates are based on consumption data for the United States as a whole. The volatility of aggregate consumption, however, is much stronger at the state level. We argue...

Official development assistance is a key source of external finance in many developing countries. A striking feature of these aid flows is their positive correlation with the business cycle of recipient countries. This pattern is puzzling in that it reinforces recipients' already strong and...

Existing estimates of the welfare cost of business cycles suggest that it is quite low and might well be minuscule. Many of these estimates are based on aggregate U.S. consumption data. Arguably, because markets are incomplete and risk-sharing is imperfect, the welfare costs computed with...

We model a simple justice system in which a court is mandated by society to assess the guilt and the punishment of an accused. The court takes prison facilities as given and neglects its impact on the cost to society of implementing the sentence. Clearly, the court, in this world, will condemn...

The Canadian unemployment insurance program is designed to reflect the varying risk of joblessness across regions. Regions that are considered low-risk areas subsidize higher risk ones. A region's risk is typically proxied by its relative unemployment rate. We use a dynamic, heterogeneous-agent...