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Risk Sharing from International Factor Income: Explaining Cross-Country Differences

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  • Vadym Volosovych

    ()
    (Department of Economics, College of Business, Florida Atlantic University)

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 1985–2004 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 Function: Revised version, 2009
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Bibliographic Info

Paper provided by Department of Economics, College of Business, Florida Atlantic University in its series Working Papers with number 06008.

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Length: 46 pages
Date of creation: Apr 2006
Date of revision: Jan 2009
Handle: RePEc:fal:wpaper:06008

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Keywords: Financial markets integration; income insurance; risk sharing; investor protection;

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Citations

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Cited by:
  1. Fratzscher, Marcel & Imbs, Jean, 2007. "Risk Sharing, Finance and Institutions in International Portfolios," CEPR Discussion Papers 6496, C.E.P.R. Discussion Papers.
  2. Yuliya Demyanyk & Vadym Volosovych, 2006. "Gains from Financial Integration in the European Union: Evidence for New and Old Members," Working Papers 06009, Department of Economics, College of Business, Florida Atlantic University, revised Aug 2007.
  3. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.
  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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