Solutions to macroeconomic models with wealth inequality and aggregate shocks often rely
on the assumption of limited but common information among households. We show that this
assumption is inconsistent with rational information choice for plausible information costs. To
do so, we embed information choice into the workhorse heterogeneous-agent model with
aggregate risk (Krusell and Smith, 1998). First, we demonstrate that the benefits of acquiring
more precise information about the state of the economy depend crucially on household …