Do regional Trade and Specialization drive intra-regional Risk-Sharing?

Barbara Pfeffer ()
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Barbara Pfeffer: University of Siegen

No 200813, MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)

Abstract: The goal of the present paper is two-fold. First, I explore the impact of different trade patterns on industrial specialisation and consequently on business cycle co-movements between and within different regions. Especially, I emphasize industrial specialisation as a result of intra- or inter-industry trade. Furthermore, I justify the predictions of different theoretical trade models on the basis of my results. Second, I analyse the degree of risk-sharing between and within the regions in dependence of the previous step. In particular, the purpose is to clarify direct and indirect channels between trade, specialisation, business cycle co-movements and risk sharing. The expectations are that countries within a region with homogeneous specialisations show intra-industry trade. Hence regional business-cycles converge. Consequently, risk-sharing within these regions is not possible. These countries tend to be more internationally financially integrated than regionally. Inter-industry trade arises in countries within regions with heterogeneous specialisation. As a result regional business-cycles diverge. Now, countries can share risk within the region. Regional financial integration is stronger for these countries than international financial integration. One further question is: do the same patterns create risk sharing also in the means of consumption co-movements between or within a region?

Keywords: Trade; Specialization; Risk Sharing (search for similar items in EconPapers)
JEL-codes: F15 F36 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2008
New Economics Papers: this item is included in nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:200813

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