Global Diversification, Growth and Welfare with Imperfectly Integrated Markets for Goods

Bernard Dumas () and Raman Uppal

No 6994, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through that, on the investment in risky projects, welfare and growth. We find that the welfare gain of financial market openness is not monotonic with respect to investors' risk aversion and the aggregate volatility of output growth. Our main result is that the welfare gain from integration is not drastically reduced by the presence of goods market imperfections, modeled as a cost of transferring goods from one country to the other. Hence, financial market integration may be a worthwhile goal to pursue even at a time when full goods mobility has not been achieved.

JEL-codes: F36 F41 (search for similar items in EconPapers)
Date: 1999-03
Note: IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published as Dumas, B. and R. Uppal. "Global Diversification, Growth, And Welfare With Imperfectly Integrated Markets For Goods," Review of Financial Studies, 2001, v14(1,Spring), 277-305.

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