Risk Sharing from International Factor Income: Explaining Cross-Country Differences

Vadym Volosovych

No 6008, Working Papers from Department of Economics, College of Business, Florida Atlantic University

Abstract: Access to world capital markets and net investment income flows between countries help protect national income from country-specific output shocks. I empirically study what factors explain cross-country differences in the extent of risk sharing from international factor income. An index of investor protection is the leading causal variable for the estimated amount of risk sharing over the 1985–2004 period. Improving investor protection in Russia to Denmark’s level implies five times larger risk sharing compared to the sample average. These results indicate one possible way to reap large potential benefits from international risk sharing.

Keywords: Financial markets integration; income insurance; risk sharing; investor protection (search for similar items in EconPapers)
JEL-codes: F36 G15 O17 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2006-04, Revised 2009-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Risk sharing from international factor income: explaining cross-country differences (2013)
Working Paper: Risk sharing from international factor income: explaining cross-country differences (2011)
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