The Feasible Gains from International Risk Sharing
AbstractWe argue that since there are several impediments to international risk sharing, the welfare gains from full international risk sharing, which have been the object of analysis in the previous literature, are not suggestive. Instead, we study the gains from feasible risk sharing and find that they are considerable (0:5% increase inpermanent consumption). Marginal benefits from further risk sharing are low, which indicates that feasible risk sharing can achieve most of the benefits from internationalrisk sharing. Surprisingly, we find that sharing short term consumption risk lowers welfare. On the basis of the results we make suggestions on how to improve existing international risk sharing systems.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 472.
Date of creation: 2001
Date of revision:
International risk sharing; welfare gains;
Other versions of this item:
- Eijffinger, Sylvester C W & Wagner, Wolf, 2001. "The Feasible Gains from International Risk Sharing," CEPR Discussion Papers 2691, C.E.P.R. Discussion Papers.
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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