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Channels of Interstate Risk Sharing: United States 1963–1990

Author

Listed:
  • Pierfederico Asdrubali
  • Bent E. Sørensen
  • Oved Yosha

Abstract

We develop a framework for quantifying the amount of risk sharing among states in the United States, and construct data that allow us to decompose the cross-sectional variance in gross state product into several components which we refer to as levels of smoothing. We find that 39 percent of shocks to gross state product are smoothed by capital markets, 13 percent are smoothed by the federal government, and 23 percent are smoothed by credit markets. The remaining 25 percent are not smoothed. We also decompose the federal government smoothing into subcategories: taxes, transfers, and grants to states.

Suggested Citation

  • Pierfederico Asdrubali & Bent E. Sørensen & Oved Yosha, 1996. "Channels of Interstate Risk Sharing: United States 1963–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1081-1110.
  • Handle: RePEc:oup:qjecon:v:111:y:1996:i:4:p:1081-1110.
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