We show that full risk sharing may not be at odd with the idea that changes in regional consumption display errorcorrecting dynamics, in line with the idea that information and transaction costs stemming from interregional portfolio diversification and labor movements induced by permanent income shocks may delay the adjustment process. Using Italian data over the period 1960-2001 it is found that regional per capita consumptions match the proposed errorcorrecting structure.
G. Cavaliere, L. Fanelli, A. Gardini (2009). Consumption Risk Sharing and Adjustment Costs. ECONOMICS BULLETIN, 29(2), 1128-1137.
Consumption Risk Sharing and Adjustment Costs
CAVALIERE, GIUSEPPE;FANELLI, LUCA;GARDINI, ATTILIO
2009
Abstract
We show that full risk sharing may not be at odd with the idea that changes in regional consumption display errorcorrecting dynamics, in line with the idea that information and transaction costs stemming from interregional portfolio diversification and labor movements induced by permanent income shocks may delay the adjustment process. Using Italian data over the period 1960-2001 it is found that regional per capita consumptions match the proposed errorcorrecting structure.File in questo prodotto:
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