Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111753
Authors: 
Denderski, Piotr
Stoltenberg, Christian
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-074/VI
Abstract: 
We develop a novel argument why better public information can help countries to insure against idiosyncratic risk. Representative agents of developing and industrial countries receive public and private signals on their future income realization and engage in risk-sharing contracts with limited enforceability. Better public information has two opposite effects. First, it has a detrimental effect on risk sharing by limiting risk-sharing possibilities as emphasized by Hirshleifer (1971). Second, it mitigates the adverse selection problem resulting from private information which improves risk sharing. We find that better public information in developing countries ameliorates risk sharing in both developing and industrial countries.
Subjects: 
Social value of information
Sovereign risk
Limited enforcement
JEL: 
E21
D31
D52
Document Type: 
Working Paper

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