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Globalization and international risk-sharing: The role of social and political integration

Faruk Balli (), Filippo Maria Pericoli () and Eleonora Pierucci

European Journal of Political Economy, 2018, vol. 55, issue C, 324-345

Abstract: This study explores the relationships among various dimensions of globalization (i.e., economic, social, and political) and international risk-sharing, by exploiting the KOF globalization indices over a long time horizon (1970–2014) and for several groups of countries (i.e., World; Organisation for Economic Cooperation and Development (OECD); European Union (EU); European Monetary Union (EMU); high-income economies (HI); and low and middle-income economies (LMI)). To this end, we follow a standard regression-based approach augmented by interaction terms. To date, the empirical literature has only investigated the economic and financial facets of globalization; we, on the other hand, find a significant relationship between risk-sharing and noneconomic aspects of globalization. For several groups of industrialized countries, social and political integration positively correlate with risk-sharing. The economic factor does not explain all the improvements that relate to globalization, and political integration plays a remarkable role in shaping risk-sharing opportunities, both among EMU/EU countries and on a global scale. For advanced economies, in an increasingly globalized world, political integration should be of great concern.

Keywords: International risk-sharing; Globalization; Social and political integration (search for similar items in EconPapers)
JEL-codes: C33 D80 E2 F15 (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1016/j.ejpoleco.2017.12.006

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