Discussion paper

DP16178 Risk Sharing in Currency Unions: The Migration Channel

International risk sharing insulates consumption from country-specific business-cycle fluctuations. This matters for countries in currency unions who lack monetary autonomy. In the spirit of Mundell, we formally integrate migration as a distinct channel into the standard framework used to quantify risk sharing. Comparing the euro area and the US we find that migration contributes significantly to risk sharing across US states, but not across the euro area. We also present survey evidence showing that migration rates are about 20 times higher in the US. The overall amount of risk sharing in the US is higher by a factor of two.


Kohler, W, G Müller and S Wellmann (2021), ‘DP16178 Risk Sharing in Currency Unions: The Migration Channel‘, CEPR Discussion Paper No. 16178. CEPR Press, Paris & London. https://cepr.org/publications/dp16178