Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
We build a model in which financial intermediaries provide insurance to households against idiosyncratic liquidity shocks. Households can invest in financial markets directly if they pay a cost. In equilibrium, the ability of intermediaries to share risk is constrained by the market. From a growth perspective, this can be beneficial because intermediaries invest less in the productive technology when they provide more risk‐sharing. Our model predicts that bank‐oriented economies can grow more slowly than more market‐oriented economies, which is consistent with some recent empirical evidence.