Blue States and Red States: GDP Synchronicity and Risk Sharing Channels

33 Pages Posted: 15 Feb 2018 Last revised: 20 Aug 2019

See all articles by David C. Parsley

David C. Parsley

Vanderbilt University – Finance and Economics

Helen Popper

Santa Clara University - Leavey School of Business - Economics Department

Date Written: August 19, 2019

Abstract

We examine state GDP comovement and consumption risk-sharing channels within the United States as a whole, and among states whose populations have voted consistently Democrat (Blue) or Republican (Red) in national elections. We document three facts: (1) state GDP growth is asynchronous, and Blue and Red states are particularly out of sync; (2) at the same time, interstate consumption risk-sharing is very high – it is high even across the political divide, and it is high even where the role of fiscal flows is minimal; and (3) the channels of risk sharing across Blue, Red, and Swing states are quite different.

Keywords: monetary union, consumption risk-sharing, economic and political divergence

JEL Classification: F45, F42, F33, F02

Suggested Citation

Parsley, David C. and Popper, Helen, Blue States and Red States: GDP Synchronicity and Risk Sharing Channels (August 19, 2019). Vanderbilt Owen Graduate School of Management Research Paper. Available at SSRN: https://ssrn.com/abstract=3117556 or http://dx.doi.org/10.2139/ssrn.3117556

David C. Parsley

Vanderbilt University – Finance and Economics ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-0649 (Phone)
615-343-7177 (Fax)

HOME PAGE: http://https://business.vanderbilt.edu/bio/david-parsley/

Helen Popper (Contact Author)

Santa Clara University - Leavey School of Business - Economics Department ( email )

500 El Camino Real
Santa Clara, CA California 95053
United States
(408) 554-6952 (Phone)
(408) 554-2331 (Fax)

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