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 in permanent consumption). Marginal benefits from further risk sharing are low, which indicates that feasible risk sharing can achieve most of the benefits from international risk 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2691.
Date of creation: Feb 2001
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Other versions of this item:
- Sylvester Eijffinger & Wolf Wagner, 2001. "The Feasible Gains from International Risk Sharing," CESifo Working Paper Series 472, CESifo Group Munich.
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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