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Insurance within the firm

Guiso, Luigi and Pistaferri, Luigi and Schivardi, Fabiano (2005) Insurance within the firm. Journal of Political Economy, Vol. 113 (5), p. 1054-1087. ISSN 0022-3808. Article.

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DOI: 10.1086/432136


We evaluate the allocation of risk between firms and their workers using matched employer-employee panel data. Unlike previous contributions, this paper focuses on idiosyncratic shocks to the firm, which are the correct empirical counterpart of the theoretical notion of diversifiable risk. We allow for both temporary and permanent shocks to output and find that firms absorb temporary fluctuations fully but insure workers against permanent shocks only partially. Risk-sharing considerations can account for about 15 percent of overall earnings variability, the remainder originating from idiosyncratic shocks to individual workers. Our welfare calculations indicate that firms are an important vehicle of insurance provision.

Item Type:Article
ID Code:920
Uncontrolled Keywords:Firm-worker risk, idiosyncratic shocks, employer-employee panel, risk sharing
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:001 Università di Sassari > 01 Dipartimenti > Economia, impresa, regolamentazione
Publisher:University of Chicago Press
Publisher Policy:Depositato in conformità con la politica di copyright dell'Editore
Deposited On:18 Aug 2009 10:03

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