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Risk sharing from international factor income: explaining cross-country differences

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  • Vadym Volosovych

Abstract

Access to world capital markets and net investment income flows between countries help protect national income from country-specific output shocks. I empirically study what factors explain cross-country differences in the extent of risk sharing from international factor income. An index of investor protection is the leading causal variable for the estimated amount of risk sharing over the 1985 to 2004 period. Improving investor protection in Russia to Denmark's level implies five times larger risk sharing compared to the sample average. These results indicate one possible way to reap large potential benefits from international risk sharing.

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File URL: http://hdl.handle.net/10.1080/00036846.2011.617703
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 11 (April)
Pages: 1435-1459

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Handle: RePEc:taf:applec:45:y:2013:i:11:p:1435-1459

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Cited by:
  1. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.
  2. Demyanyk, Yuliya & Volosovych, Vadym, 2008. "Gains from financial integration in the European Union: Evidence for new and old members," Journal of International Money and Finance, Elsevier, vol. 27(2), pages 277-294, March.
  3. Fratzscher, Marcel & Imbs, Jean, 2009. "Risk sharing, finance, and institutions in international portfolios," Journal of Financial Economics, Elsevier, vol. 94(3), pages 428-447, December.
  4. Faruk Balli & Faisal Rana, 2014. "Determinants of risk sharing through remittances: cross-country evidence," CAMA Working Papers 2014-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

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