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Title: The Feasible Gains from International Risk Sharing

Author(s): Sylvester C W Eijffinger and Wolf Wagner

Publication Date: February 2001

Keyword(s): International Risk Sharing and Welfare Gains

Programme Area(s): International Macroeconomics

Abstract: We argue that since there are several impediments to international risk sharing, the welfare gains from full international risk sharing, which have been the object of analysis in the previous literature, are not suggestive. Instead, we study the gains from feasible risk sharing and find that they are considerable (0.5% increase in permanent consumption). Marginal benefits from further risk sharing are low, which indicates that feasible risk sharing can achieve most of the benefits from international risk sharing. Surprisingly, we find that sharing short-term consumption risk lowers welfare. On the basis of the results we make suggestions on how to improve existing international risk sharing systems.

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Bibliographic Reference

Eijffinger, S and Wagner, W. 2001. 'The Feasible Gains from International Risk Sharing'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2691