How Big are Potential Welfare Gains from International Sharing?

33 Pages Posted: 28 Oct 2006

See all articles by Eric van Wincoop

Eric van Wincoop

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: January 1998

Abstract

There is extensive evidence that the degree of risksharing accomplished by international financial markets is low. Some have argued that this is the result of small potential benefits from risksharing. The gains from riskpooling that have been reported in the literature range from negligible to enormous. This paper documents to what extent the results are sensitive to the parameterization of preferences, and assumptions about the stochastic process and measurement of the endowment. We find that for realistic assumptions about the underlying factors, the potential gains from risksharing are quite sizable. For OECD countries they are equivalent to increases in tradables consumption in the range of 1.1 to 3.5 percent for a 50 year horizon, and 2.5 to 7.4 percent for a 100 year horizon.

Keywords: international risksharing, welfare gains

JEL Classification: F30, F41, G15

Suggested Citation

van Wincoop, Eric, How Big are Potential Welfare Gains from International Sharing? (January 1998). FRB of New York Staff Report No. 37, Available at SSRN: https://ssrn.com/abstract=940657 or http://dx.doi.org/10.2139/ssrn.940657

Eric Van Wincoop (Contact Author)

University of Virginia - Department of Economics ( email )

Rouss Hall 114
P.O. Box 400182
Charlottesville, VA 22904-4182
United States
804-924-3997 (Phone)
804-982-2904 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
34
Abstract Views
503
PlumX Metrics