Limited Capital Market Participation and Human Capital Risk

摘要: By introducing a labor market into the neoclassical asset pricing model, limited capital participation can be an equilibrium outcome. Labor contracts are derived endogenously as part of dynamic in production economy. Firms write that insure workers, allowing agents to achieve Pareto optimal allocation even when span markets is restricted just stocks and bonds. Capital facilitate this risk sharing because it there firms offload they assumed from workers. In effect, by investing markets, investors provide insurance wage earners who then optimally choose not participate markets.