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Output Smoothing between Regions in Sweden

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  • Andersson, Linda

    () (Department of Economics, Umeå University)

Abstract

The objective of this paper is to analyze the amount of risk sharing of output that takes place between regions in Sweden. Using the approach by Asdrubali et al. (1996), further developed by Mélitz and Zumer (2002), we find that the capital market is the largest source of risk sharing of gross regional product in Sweden. Still, roughly 12 percent of a change in regional output is smoothed among the regions through the fiscal system. Taking a closer look at the fiscal component, the results suggest that national taxes play a larger role in the smoothing process than transfer payments do. There is also some evidence that there are regional differences in the sense that regions located in the south rely more on the capital market as a source of insurance against shocks in output, while the tax and transfer systems provide a larger extent of risk sharing for regions located in the north.

Suggested Citation

  • Andersson, Linda, 2004. "Output Smoothing between Regions in Sweden," Umeå Economic Studies 643, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0643
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    References listed on IDEAS

    as
    1. von Hagen, Jürgen & Hepp, Ralf, 2000. "Regional risksharing and redistribution in the German federation," ZEI Working Papers B 15-2000, University of Bonn, ZEI - Center for European Integration Studies.
    2. 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.
    3. Sorensen, Bent E. & Yosha, Oved, 1998. "International risk sharing and European monetary unification," Journal of International Economics, Elsevier, vol. 45(2), pages 211-238, August.
    4. Decressin, Jorg, 2002. "Regional income redistribution and risk sharing: how does Italy compare in Europe?," Journal of Public Economics, Elsevier, vol. 86(2), pages 287-306, November.
    5. Bayoumi, Tamim & Masson, Paul R., 1995. "Fiscal flows in the United States and Canada: Lessons for monetary union in Europe," European Economic Review, Elsevier, vol. 39(2), pages 253-274, February.
    6. Robin Boadway & Masayoshi Hayashi, 2002. "An Evaluation of the Risk-Sharing Function of Equalization in Canada," Working Papers 1006, Queen's University, Department of Economics.
    7. Buettner, Thiess, 2002. "Fiscal federalism and interstate risk sharing: empirical evidence from Germany," Economics Letters, Elsevier, vol. 74(2), pages 195-202, January.
    8. Linda Andersson, 2004. "Regional Risk-sharing Provided by the Fiscal System: Empirical Evidence from Sweden," Regional Studies, Taylor & Francis Journals, vol. 38(3), pages 269-280.
    9. von Hagen, Jürgen, 1998. "Fiscal policy and intranational risk-sharing," ZEI Working Papers B 13-1998, University of Bonn, ZEI - Center for European Integration Studies.
    10. Robin Boadway & Masayoshi Hayashi, 2004. "An Evaluation of the Stabilization Properties of Equalization in Canada," Canadian Public Policy, University of Toronto Press, vol. 30(1), pages 91-109, March.
    11. Melitz, Jacques & Zumer, Frederic, 2002. "Regional redistribution and stabilization by the center in Canada, France, the UK and the US:: A reassessment and new tests," Journal of Public Economics, Elsevier, vol. 86(2), pages 263-286, November.
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    More about this item

    Keywords

    risk sharing; taxes; transfers; intergovernmental relations; capital market;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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