Incomplete Intertemporal Consumption Smoothing and Incomplete Risk Sharing |
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| Authors: | PIERFEDERICO ASDRUBALI SOYOUNG KIM |
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| Institution: | 1. Pierfederico Asdrubali is from the Department of Political and Social Sciences, John Cabot University, Via della Lungara 233, 00165 Rome, Italy (E‐mail: pasdrubali@johncabot.edu).;2. Soyoung Kim is Professor, Department of Economics, Korea University, 5‐1 Anam‐Dong, Sungbuk‐Ku, Seoul, Korea 136‐701 (E‐mail: soyoungkim@korea.ac.kr). |
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| Abstract: | This paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of “inter‐regional” risk sharing. The empirical results for the U.S. states and OECD and EU countries suggest that: (i) regardless of the assumption on the degree of intertemporal consumption smoothing, the degree of risk sharing within a country is larger than across countries; (ii) the degree of intertemporal consumption smoothing within a country is also larger than across countries; and (iii) the difference between the degree of intertemporal consumption smoothing within U.S. states and across OECD and EU countries is as large as the difference between the degree of risk sharing, contrary to the findings of some past studies. |
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| Keywords: | E21 F36 F41 intertemporal consumption smoothing risk sharing channels of risk sharing international versus intranational |
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