Private Information in the Family
Abstra ct:
We examine the role of private infor mation within families. Optimal risk sharing under full information implies that relative consumption should be independent of relative income within couples, whereas a positive relationship arises under optimal incentive-con strained insurance with private information. We assemble a new data set bas ed on Dutch panel data that contains evidence on private information within couples. When we split the sample into couples that are fully informed abo ut each other's income and those that are not, a positive relationship betw een income and consumption shares emerges only among those who are not full y informed about each other's income. This holds true when adding couple fi xed effects, so that, indeed, a change in relative income within a given co uple affects their consumption sharing. In contrast, measures of the degree of commitment have no impact on risk sharing once private information is c ontrolled for. We interpret these findings using a model of optimal-incenti ve constrained insurance that (unlike approaches based on the revelation pr inciple) does not require full disclosure of private information as part of the optimal mechanism.
DTSTAMP:20260406T143646Z DTSTART:20250407T163000Z DTEND:20250407T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR