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Output Smoothing between Regions in Sweden

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  • Andersson, Linda

    ()
    (Department of Economics, Umeå University)

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    Abstract

    The objective of this paper is to analyze the amount of risk sharing of output that takes place between regions in Sweden. Using the approach by Asdrubali et al. (1996), further developed by Mélitz and Zumer (2002), we find that the capital market is the largest source of risk sharing of gross regional product in Sweden. Still, roughly 12 percent of a change in regional output is smoothed among the regions through the fiscal system. Taking a closer look at the fiscal component, the results suggest that national taxes play a larger role in the smoothing process than transfer payments do. There is also some evidence that there are regional differences in the sense that regions located in the south rely more on the capital market as a source of insurance against shocks in output, while the tax and transfer systems provide a larger extent of risk sharing for regions located in the north.

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    Bibliographic Info

    Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 643.

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    Length: 17 pages
    Date of creation: 05 Nov 2004
    Date of revision:
    Handle: RePEc:hhs:umnees:0643

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    Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
    Phone: 090 - 786 61 42
    Fax: 090 - 77 23 02
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    Web page: http://www.econ.umu.se/
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    Related research

    Keywords: risk sharing; taxes; transfers; intergovernmental relations; capital market;

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    1. Melitz, Jacques & Zumer, Frederic, 2002. "Regional redistribution and stabilization by the center in Canada, France, the UK and the US:: A reassessment and new tests," Journal of Public Economics, Elsevier, vol. 86(2), pages 263-286, November.
    2. Bayoumi, Tamim & Masson, Paul R, 1994. "Fiscal Flows in the United States and Canada: Lessons for Monetary Union in Europe," CEPR Discussion Papers 1057, C.E.P.R. Discussion Papers.
    3. Sorensen, B-E & Yosha, O, 1996. "International Risk Sharing and European Monetary Unification," Papers, Tel Aviv 40-96, Tel Aviv.
    4. Decressin, Jorg, 2002. "Regional income redistribution and risk sharing: how does Italy compare in Europe?," Journal of Public Economics, Elsevier, vol. 86(2), pages 287-306, November.
    5. Robin Boadway & Masayoshi Hayashi, 2004. "An Evaluation of the Stabilization Properties of Equalization in Canada," Canadian Public Policy, University of Toronto Press, vol. 30(1), pages 91-109, March.
    6. von Hagen, Jürgen, 1998. "Fiscal policy and intranational risk-sharing," ZEI Working Papers B 13-1998, ZEI - Center for European Integration Studies, University of Bonn.
    7. Robin Boadway & Masayoshi Hayashi, 2002. "An Evaluation of the Risk-Sharing Function of Equalization in Canada," Working Papers, Queen's University, Department of Economics 1006, Queen's University, Department of Economics.
    8. Buettner, Thiess, 2002. "Fiscal federalism and interstate risk sharing: empirical evidence from Germany," Economics Letters, Elsevier, vol. 74(2), pages 195-202, January.
    9. Linda Andersson, 2004. "Regional Risk-sharing Provided by the Fiscal System: Empirical Evidence from Sweden," Regional Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(3), pages 269-280.
    10. von Hagen, Jürgen & Hepp, Ralf, 2000. "Regional risksharing and redistribution in the German federation," ZEI Working Papers B 15-2000, ZEI - Center for European Integration Studies, University of Bonn.
    11. Asdrubali, Pierfederico & Sorensen, Bent E & Yosha, Oved, 1996. "Channels of Interstate Risk Sharing: United States 1963-1990," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 111(4), pages 1081-1110, November.
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