Risk-sharing and consumption-smoothing patterns in the US and the Euro Area: A comprehensive comparison

Cinzia Alcidi, D’Imperio, Paolo and Gilles Thirion
Authors registered in the RePEc Author Service: Paolo D'Imperio

Structural Change and Economic Dynamics, 2023, vol. 64, issue C, 58-69

Abstract: We compare the fraction of asymmetric shocks smoothed in the United States and in the Euro Area through risk-sharing channels. By building on a novel dataset, the paper addresses key comparability issues in the literature. Our findings confirm that total risk sharing is higher in the United States and that capital markets are a more powerful shock-absorption channel than in the Euro Area, but less so than previously reported. We also provide a detailed comparison of risk-sharing mechanisms over time and in the face of longer-lasting shocks. Our results suggest that the financial crisis was associated with a reduction in risk sharing through capital markets in the United States, while during the sovereign debt crisis counter-cyclical fiscal policies allowed for higher consumption smoothing in the Euro Area. Finally, both in the United States and in the Euro Area risk sharing tends to decline as shocks become more persistent.

Keywords: Risk-sharing mechanisms; Insurance mechanisms; Euro Area; United States (search for similar items in EconPapers)
JEL-codes: E21 F15 F45 H30 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Risk-sharing and Consumption-smoothing Patterns in the US and the Euro Area: A comprehensive comparison (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:streco:v:64:y:2023:i:c:p:58-69

DOI: 10.1016/j.strueco.2022.11.005

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