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Risk sharing of disaggregate macroeconomic and idiosyncratic shocks

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  • Gregory D. Hess
  • Kwanho Shin

Abstract

Comparing the degree to which idiosyncratic and disaggregate macro shocks (such as regional and industry shocks) are not shared in the economy provides greater understanding of why the economy lacks risk-sharing arrangements in specific areas and can suggest areas where the economy’s risk-sharing capability could be enhanced. The authors find that a negligible amount of risk (around 10 percent) is shared in the aggregate, about 50 percent is shared within regions and industries, while the remaining 40 percent is not shared with other households. These findings suggest that given the low level of international risk sharing, greater international integration may not increase international risk sharing significantly.

Suggested Citation

  • Gregory D. Hess & Kwanho Shin, 1999. "Risk sharing of disaggregate macroeconomic and idiosyncratic shocks," Working Paper 9915, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:9915
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    Cited by:

    1. Ralph Chami & Gregory Hess, 2005. "For Better or For Worse? State-Level Marital Formation and Risk Sharing," Review of Economics of the Household, Springer, vol. 3(4), pages 367-385, December.
    2. Hess, Gregory D. & Shin, Kwanho, 2000. "Risk sharing by households within and across regions and industries," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 533-560, June.
    3. Gregory D. Hess, 2004. "Marriage and Consumption Insurance: What's Love Got to Do with It?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 290-318, April.

    More about this item

    Keywords

    Risk;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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