Consumption risk sharing and adjustment costs
AbstractWe show that full risk sharing may not be at odd with the idea that changes in regional consumption display error-correcting dynamics, in line with the idea that information and transaction costs stemming from interregional portfolio diversification and labor movements induced by permanent income shocks may delay the adjustment process. Using Italian data over the period 1960-2001 it is found that regional per capita consumptions match the proposed error-correcting structure.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 2 ()
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Consumption risk sharing; Adjustment costs; Forward-looking behavior;
Other versions of this item:
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
- E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
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