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Public Employment and Regional Risk Sharing

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  • Lars-Erik Borge
  • Egil Matsen

Abstract

We provide an empirical analysis of regional risk sharing in Norway over the period 1977-90. The approach of Asdrubali, Sørensen and Yosha (1996) is extended to take public employment into account as a possible shock absorber. The other channels of risk sharing are capital markets and commuting, taxes and transfers, and credit markets. The estimated degree of regional consumption insurance is very high. We cannot reject the hypothesis that there is full interregional risk sharing in the short term. Public employment absorbs up to 25 percent of private sector output shocks in our analyses. Generally, central government insurance against regional shocks is relatively more important, the more permanent the shocks are, and vice versa for market-based risk-sharing channels. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .

Suggested Citation

  • Lars-Erik Borge & Egil Matsen, 2004. "Public Employment and Regional Risk Sharing," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 215-230, June.
  • Handle: RePEc:bla:scandj:v:106:y:2004:i:2:p:215-230
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    1. repec:taf:regstd:v:51:y:2017:i:7:p:1100-1114 is not listed on IDEAS
    2. Javier Vázquez-Grenno & Jordi Jofre-Monseny & José I. Silva, 2016. "Local labor market effects of public employment," Working Papers 2016/11, Institut d'Economia de Barcelona (IEB).
    3. Ho, Chun-Yu & Ho, Wai-Yip Alex & Li, Dan, 2015. "Intranational risk sharing and its determinants," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 89-113.
    4. Juessen, Falko, 2008. "Risk Sharing and Commuting Among US Federal States," IZA Discussion Papers 3374, Institute for the Study of Labor (IZA).
    5. Sunder, Marco, 2003. "The making of giants in a welfare state: the Norwegian experience in the 20th century," Economics & Human Biology, Elsevier, vol. 1(2), pages 267-276, June.
    6. Sebastian G. Kessing & Chiara Strozzi, 2017. "The regional distribution of public employment: theory and evidence," Regional Studies, Taylor & Francis Journals, vol. 51(7), pages 1100-1114, July.
    7. Masayoshi Hayashi, 2013. "On the Decomposition of Regional Stabilization and Redistribution," CIRJE F-Series CIRJE-F-910, CIRJE, Faculty of Economics, University of Tokyo.

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