Date: 2008
Type: Working Paper
International Consumption Insurance and Within-Country Risk Reallocation
Working Paper, EUI MWP, 2008/03
LO PRETE, Anna, International Consumption Insurance and Within-Country Risk Reallocation, EUI MWP, 2008/03 - https://hdl.handle.net/1814/8121
Retrieved from Cadmus, EUI Research Repository
Institutions meant to reallocate risks that cannot be fully diversified on financial
markets, such as labour income fluctuations, may also affect the response of aggregate
consumption to country-specific income shocks. This paper empirically assesses this
possibility by extending a standard cross-country consumption insurance test to account
for the interaction between macroeconomic shocks and labour and credit market
institutions. In a panel of 15 OECD countries observed over the 1971-2003 period,
institutional heterogeneity is a significant determinant of cross-country differences in
consumption responsiveness to income changes. The estimates are remarkably robust to
the inclusion of unobservable country-level heterogeneity and time-varying institutional
indicators.
Cadmus permanent link: https://hdl.handle.net/1814/8121
ISSN: 1830-7728
Series/Number: EUI MWP; 2008/03
Publisher: European University Institute