Abstract :
The aggregateeffectsofmarketincompletenessarestudiedinamodelwhereagents
face idiosyncratic,uninsurablehumancapitalinvestmentrisk.Usingalife-cyclemodel
with aversionofa Ben-Porath(1967) human capitalaccumulationtechnology,
stationaryequilibriaofcalibratedcasesareanalyzedinwhichriskarisesfrom
specializationriskandcareerrisk.Withcareerriskonly,stationaryequilibriaresemble
thosestudiedby Aiyagari(1994), andtheimpactofuninsurableidiosyncraticriskis
relativelysmall.Withasignificantamountofspecializationrisk,however,stationary
equilibriaareseverelydistorted,withhumancapitalabout57percentaslargeasits
completemarketscounterpart
