EconPapers    
Economics at your fingertips  
 

Pooling risk among countries

Michael Callen, Jean Imbs () and Paolo Mauro ()
Additional contact information
Michael Callen: John F. Kennedy School of Government - Harvard University [Cambridge]

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: Suppose that international sharing risk—worldwide or with large numbers of countries—were costly. How much risk-sharing could be gained in small sets (or "pools") of countries? To answer this question, we compute the means and variances of poolwide gross domestic product growth, for all possible pools of any size drawn from a sample of 74 countries, and compare them with the means and variances of consumption growth in each country individually. From the difference, we infer potential diversification and welfare gains. As much as two-thirds of the first best, full worldwide welfare gains can be obtained in groupings of as few as seven countries. The largest potential gains arise from pools consisting of countries in different regions and including countries with weak institutions. We argue that international risk-sharing fails to emerge because the largest potential gains are among countries that do not trust each other's willingness and ability to abide by international contractual obligations.

Keywords: Risk sharing; Diversification; Growth-indexation; GDP-indexed instruments (search for similar items in EconPapers)
Date: 2015-05
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01301583
References: Add references at CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Published in Journal of International Economics, Elsevier, 2015, 96 (1), pp.88-99. ⟨10.1016/j.jinteco.2015.01.006⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Pooling risk among countries (2015) Downloads
Working Paper: Pooling risk among countries (2015) Downloads
Working Paper: Pooling risk among countries (2015)
Working Paper: Pooling risk among countries (2015)
Working Paper: Pooling risk among countries (2015)
Working Paper: Pooling Risk Among Countries (2007) Downloads
Working Paper: Pooling Risk Among Countries (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01301583

DOI: 10.1016/j.jinteco.2015.01.006

Access Statistics for this paper

More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL
Bibliographic data for series maintained by CCSD ().

 
Page updated 2021-04-06
Handle: RePEc:hal:cesptp:hal-01301583