Risk Sharing in a Federation with Population Mobility and Long Horizons
AbstractThis paper considers risk sharing among individuals within and across regions in a federation with population mobility and infinite horizons. It is shown that the regional authorities will not fully exploit gains from inter-regional risk sharing when population mobility is imperfect. However, in the Nash equilibrium there is complete risk sharing among the individuals within each region, which corresponds to the policies of the central authority. Regional authorities who care about their reputation may be able to commit to an efficient allocation. It is possible that improvements in the degree of mobility will make such commitments less likely.
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Bibliographic InfoPaper provided by York University, Department of Economics in its series Working Papers with number 1999_03.
Length: 28 pages
Date of creation: Mar 1999
Date of revision:
Risk Sharing; Federation; Population Mobility; Efficiency;
Find related papers by JEL classification:
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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