Sharing risk within and across countries: the role of labor market institutions

Anna Lo Prete

Economic Systems, 2013, vol. 37, issue 3, 449-461

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.

Keywords: Risk sharing; Labor markets; Incomplete financial markets; Employment protection (search for similar items in EconPapers)
JEL-codes: E2 F4 G15 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (7)

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Working Paper: Sharing Risk Within and Across Countries: The Role of Labor Market Institutions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:37:y:2013:i:3:p:449-461

DOI: 10.1016/j.ecosys.2013.02.002

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