Consumption risk sharing and adjustment costs

Luca Fanelli (), Giuseppe Cavaliere and Attilio Gardini

MPRA Paper from University Library of Munich, Germany

Abstract: We show that full risk sharing may not be at odd with the idea that changes in regional consumption display error-correcting dynamics, in line with the idea that information and transaction costs stemming from interregional portfolio diversification and labor movements induced by permanent income shocks may delay the adjustment process. Using Italian data over the period 1960-2001 it is found that regional per capita consumptions match the proposed error-correcting structure.

Keywords: Consumption risk sharing; Adjustment costs; Forward-looking behavior (search for similar items in EconPapers)
JEL-codes: C32 E21 (search for similar items in EconPapers)
Date: 2004-10, Revised 2006-11
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Consumption risk sharing and adjustment costs (2009)
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