Consumption risk sharing and adjustment costs

Giuseppe Cavaliere, Luca Fanelli () and Attilio Gardini ()
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Attilio Gardini: University of Bologna

Economics Bulletin, 2009, vol. 29, issue 2, 1117-1126

Abstract: We show that full risk sharing may not be at odd with the idea that changes in regional consumption display error-correcting 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 error-correcting structure.

Keywords: Consumption risk sharing; Adjustment costs; Forward-looking behavior (search for similar items in EconPapers)
JEL-codes: C3 E2 (search for similar items in EconPapers)
Date: 2009-05-25
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Consumption risk sharing and adjustment costs (2006)
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