Interstate Risk Sharing in Germany: 1970-2006
Ralf Hepp () and
Juergen von Hagen ()
No 2010-13, Working papers from University of Connecticut, Department of Economics
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 percent of a shock are smoothed by private factor markets, 50 percent are smoothed by the German government sector, and a further 17 percent are smoothed through credit markets. For the post-reunification period, 1995 to 2006, the relative importance of the smoothing channels has changed. Factor markets contribute around 50.5 percent to consumption smoothing. The government sector's role is diminished: it smoothes around 10 percent of a shock. Fiscal equalization only plays a very small role for consumption smoothing in Germany.
Keywords: Regional Risk-sharing; Factor Markets; Consumption Smoothing; Fiscal Federalism (search for similar items in EconPapers)
JEL-codes: H77 E63 F42 (search for similar items in EconPapers)
Pages: 23 pages
New Economics Papers: this item is included in nep-eec
Note: This paper was partially written while Ralf Hepp was visiting the University of Connecticut
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Journal Article: Interstate risk sharing in Germany: 1970--2006 (2013)
Working Paper: Interstate Risk Sharing in Germany:1970-2006 (2011)
Working Paper: Interstate Risk Sharing in Germany: 1970-2006 (2010)
Working Paper: Interstate risk sharing in Germany: 1970-2006 (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2010-13
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