Risk Sharing in Currency Unions: The Migration Channel

47 Pages Posted: 14 Jul 2021

See all articles by Wilhelm Kohler

Wilhelm Kohler

University of Tuebingen - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Gernot J. Müller

University of Tuebingen - Department of Economics

Susanne Wellmann

University of Tuebingen

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

International risk sharing insulates consumption from country-specific business-cycle fluctuations. This matters for countries in currency unions who lack monetary autonomy. In the spirit of Mundell, we formally integrate migration as a distinct channel into the standard framework used to quantify risk sharing. Comparing the euro area and the US we find that migration contributes significantly to risk sharing across US states, but not across the euro area. We also present survey evidence showing that migration rates are about 20 times higher in the US. The overall amount of risk sharing in the US is higher by a factor of two.

JEL Classification: F22, F41, G15, J61

Suggested Citation

Kohler, Wilhelm K. and Müller, Gernot J. and Wellmann, Susanne, Risk Sharing in Currency Unions: The Migration Channel (May 2021). CEPR Discussion Paper No. DP16178, Available at SSRN: https://ssrn.com/abstract=3886618

Wilhelm K. Kohler (Contact Author)

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Gernot J. Müller

University of Tuebingen - Department of Economics ( email )

Mohlstrasse 36
D-72074 Tuebingen, 72074
Germany

Susanne Wellmann

University of Tuebingen ( email )

Wilhelmstr. 19
72074 Tuebingen, Baden Wuerttemberg 72074
Germany

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