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Interstate risk sharing in Germany: 1970--2006

Ralf Hepp () and Juergen von Hagen ()

Oxford Economic Papers, 2013, vol. 65, issue 1, 1-24

Abstract: We study the channels of interstate risk sharing in Germany for the time period 1970 to 2006, estimating the degrees of smoothing of a shock to a state's gross domestic product by factor markets, the government sector, and credit markets, respectively. Within the government sector, we pay special attention to Germany's fiscal equalization mechanism. For pre-unification Germany, we find that about 19% of a shock is smoothed by private factor markets, 50% is smoothed by the German government sector, and a further 17% is smoothed through credit markets. For the post-unification period, 1995 to 2006, the relative importance of the smoothing channels has changed. Factor markets contribute around 50.5% to consumption smoothing. The government sector's role is diminished, but still economically significant: it smoothes around 10% of a shock. Copyright 2013 Oxford University Press 2012 All rights reserved, Oxford University Press.

Date: 2013
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Related works:
Working Paper: Interstate Risk Sharing in Germany:1970-2006 (2011) Downloads
Working Paper: Interstate Risk Sharing in Germany: 1970-2006 (2010) Downloads
Working Paper: Interstate Risk Sharing in Germany: 1970-2006 (2010) Downloads
Working Paper: Interstate risk sharing in Germany: 1970-2006 (2010) Downloads
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