utility, which has two key features. First, intertemporal substitution and risk aversion are disentangled. Second, the … when the departure from standard expected utility with rational expectations is small. In addition, we show that RI … increases the implied equity premium because inattentive investors with recursive utility face greater long-run risk and thus …

consumption across states of nature, one must also consider the assets' effects on households' ability to smooth consumption over … returns correlate negatively with income shocks) even though the assets offer identical opportunities to smooth consumption … be substantial (above 1% of certainty-equivalent consumption), the assets we consider can only mitigate a relatively …

We assess the degree of consumption smoothing implicit in a calibrated life-cycle version of the standard incomplete … the model have access to less consumption-smoothing against permanent earnings shocks than what is measured in the data …. BPP estimate that 36% of permanent shocks are insurable (i.e., do not translate into consumption growth), whereas the …

productivity, to study the efficient degree of consumption inequality in the long run. In our environment a utilitarian planner … allows for consumption inequality even when labor productivity is public information. We show that adding private information … does not alter this result. We also show that the informationally constrained optimal insurance contract has a resetting …

of consumption insurance against shocks to male and female wages, as estimated empirically by Blundell, Pistaferri and … consumption, compared to the empirical estimates of 32% and 19%. Most of the consumption insurance against permanent male wage …-household income insurance mechanism strongly biases upward the welfare losses from idiosyncratic wage risk as well as the desired …