Sharing Risk Within and Across Countries: The Role of Labor Market Institutions

Anna Lo Prete

Department of Economics and Statistics Cognetti de Martiis. Working Papers from University of Turin

Abstract: This paper studies the effect of labor market institutions on within- and cross-country risk-sharing using a model of international trade in risky assets modified to include a subset of agents, labor-owners, who do not access financial markets, and employment security provisions. Labor market institutions, by promoting within-country risk-shifting arrangements between agents with or without access to financial markets, reduce the fluctuations of non-tradable labor incomes and amplify the fluctuations of capital incomes. Capital flows become more volatile across countries, and if the configuration of labor markets differs across countries, capital-owners bear the burden of systematic undiversifiable world aggregate uncertainty.

Pages: 24 pages
Date: 2013-05
New Economics Papers: this item is included in nep-opm
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Citations: View citations in EconPapers (7)

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Journal Article: Sharing risk within and across countries: the role of labor market institutions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:uto:dipeco:201328

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