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On the Empirics of China's Inter-regional Risk Sharing

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  • Li, Jia

Abstract

This study provides a comprehensive investigation on the mechanisms of risk sharing among China's provinces over the period 1995-2009. Using three empirical techniques, we found that, first, the extent of risk sharing attained by the provinces is relatively limited, and the financial liberalization since the late 1990s has not helped improve the degree of risk sharing. Second, credit market, compared to capital market, capital depreciation, and tax-transfer system, has been the single operative channel of risk sharing in China. Third, there are possibilities for China to gain the benefits of risk sharing from various institutional factors. In particular, though still insignificant, rural-urban migration, formal financial system and fiscal transfer appear to start to promote risk sharing recently. In contrast, FDI seems to be a dis-smoothing factor in China.

Suggested Citation

  • Li, Jia, 2012. "On the Empirics of China's Inter-regional Risk Sharing," MPRA Paper 37805, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37805
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    References listed on IDEAS

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    Cited by:

    1. Huang, Shuo & Fidrmuc, Jan & Fidrmuc, Jarko, 2015. "Whither China? Reform and economic integration among Chinese regions," China Economic Review, Elsevier, vol. 33(C), pages 94-110.

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    More about this item

    Keywords

    Risk sharing; financial liberalization; China;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • C0 - Mathematical and Quantitative Methods - - General
    • G0 - Financial Economics - - General
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables

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