international consumption risk sharing this paper formally examines the implications of international consumption risk sharing for a panel of industrialized countries we theoretically derive the international consumption insurance proposition in a simple setup and show how to modify it in more complicated models we analyze the implications of the theory for pairs of countries and find that aggregate domestic consumption is almost completely insured against idiosyncratic real demographic fiscal and monetary shocks over short cycles but that it covaries with these variables over medium and long cycles the cross equation restrictions imposed by the theory are rejected the policy implications are discussed

risk sharing by households within and across regions and industries abstract cochrane 1991 journal of political economy 99 957 976 and mace 1991 journal of political economy 99 928 956 test if risk sharing across households is complete in the sense that household consumption moves one for one with aggregate consumption in their studies the source of income risk is idiosyncratic and agents can share risk across the entire economy using a sample of households from the panel study on income dynamics psid we explore whether households share the risk associated with their industries and regions across households in other regions and industries we find that a large fraction of risk faced by households is not shared across regions and industries

holdout existence information and contingent contracting abstractthe holdout problem permeates policy discussions of legal issues involving bargaining for land acquisition and more broadly impacts multilateral bargaining between agents laboratory experiments investigate the scope of the holdout problem the research strategy incorporates as treatment variables available information and the exposure problem arising from the unavailability of contingent contracts an examination reveals that holdout can reliably produce large inefficiencies and lost opportunities for mutually advantageous trade the introduction of contingent contracts facilitates successful bargaining however buyers are not made significantly better off by contingent contracts

international risk sharing in the short run and in the long run international risk sharing has far reaching implications both for economic policy and for basic research in economics when countries do not share consumption risk individuals experience consumption fluctuations that are undesirable and possibly unnecessary we investigate bilateral risk sharing at short vs long horizons we find substantial cross country consumption correlations at trend and business cycle frequencies correlations are particularly high within europe prior research focused on first difference correlations which are typically quite low we argue that this reflects measurement error at all horizons we find that consumption correlations are not significantly different from output correlations implying a lack of deliberate consumption risk sharing le partage international du risque a de grandes implications a la fois pour la politique economique et pour la recherche economique de base quand des pays ne partagent pas les risques de consommation les individus font l experience de fluctuations de consommation indesirables et possiblement non necessaires on examine le partage de risque bilateral a court et a long terme on decouvre des correlations entre pays tant au niveau des tendances que des frequences du cycle d affaires ces correlations sont particulierement elevees en europe des travaux anterieurs se sont concentres sur les correlations entre premieres differences qui sont typiquement assez faibles on suggere que ces resultats refletent une erreur de mesure pour tous les horizons temporels on decouvre que les correlations de consommation ne different pas significativement des correlations de production ce qui implique un manque de partage de risque delibere au niveau de la consommation

what macroeconomic risks are not shared by international investors adopting an asset market view of international risk sharing we identify various sources of macroeconomic risk faced by international investors using a structural vector autoregression model we find that most of the risks of exogenous financial market shocks are shared by international investors through the existing asset markets however other macroeconomic risks such as those associatedwith exogenousshocks to consumption growth inflationandmonetarypolicies arenot fullysharedacrosscountries this finding helps us understand the apparently contradicting perceptions of international risk sharing generated by the analysis of asset market returns versus that of aggregate consumption growth across countries jel codes e44 f31 g12

trade finance specialization and synchronization i investigate the determinants of business cycle synchronization across regions the linkages between trade in goods financial openness specialization and business cycle synchronization are evaluated in the context of a system of simultaneous equations the main results are as follows i specialization patterns have a sizable effect on business cycles most of this effect is independent of trade or financial policy but directly reflects differences in gdp per capita ii a variety of measures of financial integration suggest that economic regions with strong financial links are significantly more synchronized even though they also tend to be more specialized iii the estimated role of trade is closer to that implied by existing models once intra industry trade is held constant the results obtain in a variety of data sets measurement strategies and specifications they relate to a recent strand of international business cycle models with incomplete markets and transport costs and on the empir

poverty and other determinants of child labor in bangladesh in this research we examine poverty and other determinants of child labor in bangladesh we define income quintiles as a means of measuring family poverty and add child and family characteristics to our model we estimate the likelihood that a child will work using separate logistic regression models for younger and older boys and girls in urban and rural areas our results support the notion that a family s poverty affects the probability that a child will work keeping children away from work is a luxury these families cannot afford moreover it is important to examine separate demographic groups in order to fully understand the determinants of child labor in bangladesh since the effects of child and family variables on the probability that a child will work differ among these groups

incentive problems and the pattern of international risk sharing abstract this paper analyzes the implications of moral hazard and a lack of contract enforcement for risk sharing across countries and regions we demonstrate that both incentive problems can considerably restrict efficient risk sharing however we show that the cross sectional risk sharing component is much more affected than the intertemporal component we argue that this may help to explain several stylized facts of international risk sharing such as the low degree of insurance against permanent shocks

risk and potential insurance in europe abstract this paper argues that risk is related to long run volatility of income and therefore stabilization policies should target permanent fluctuations we show that such fluctuations can in principle be insured away by a multinational fiscal federation which smooths income cross sectionally and has no ex ante permanent redistribution effects we propose a measure of risk and a measure of potential insurable risk we estimate these measures for the european countries and compare results with the us results show that potential insurable income risk in europe is about 45 most countries will benefit from an average income tax of 10 but gains differ widely across countries

trends countertrends and gaps in women s employment abstract the factors driving global integration namely trade expansion technological change and the internationalization of production have altered production patterns and changed the composition of output in both developed and developing countries as global patterns and modes of production have changed there has been a general shift away from agriculture toward industry and services along with these output changes have come significant changes in regional and national employment in developing and developed countries these changes span divergent trends on the one hand there is the increased availability of more and better quality employment as workers shift out of agriculture and subsistence production and into waged employment in the expanding manufacturing and service sectors on the other hand there have been sectors where the trend has been away from formalization toward the informalization and semi formalization of production activities and employment practices women have generally benefited from improvements in the world economy this article demonstrates however that patterns of employment and income generation among women often diverge however from global trends in important ways that suggest that the forces shaping global integration effect women differently the article frames a policy discussion that the international center for research on women led to debate the implications of recent trends in women s employment in the developing and developed world the six articles in this section represent this discussion they span a range of empirical and theoretical inquiry exploring global employment trends and highlighting changes in women s participation in formal and informal economic activities

the economics of child labor if child labor as a mass phenomenon occurs not because of parental selfishness but because of the parents concern for the household s survival the popular argument for banning child labor loses much of its force however this assumption about parental decision making coupled with the assumption of substitutability in production between child and adult labor could result in multiple equilibria in the labor market with one equilibrium where children work and another where adult wage is high and children do not work the paper establishes this result and discusses its policy implications copyright 1998 by american economic association

international business cycles in theory and in practice this paper investigates whether multi country international business models can account for international comovements in the oecd there are substantial positive comovements between many output components between levels of employment and between total factor productivities the standard international business cycle model is not consistent with these comovements except for consumption levels the model implies either negative or very low comovements this is a robust feature of the theoretical models independently of specific parameter values one interesting finding is that a more general specification of the technology shock processes lead to substantial comovements but at the cost of another deficiency

currency unions and international integration this paper characterizes the integration patterns of international currency unions such as the cfa franc zone we empirically explore different features of currency unions and compare them to countries with sovereign monies by examining the criteria for mundellos concept of an optimum currency area we find that members of currency unions are more integrated than countries with their own currencies for instance we find that currency union members have more trade and less volatile real exchange rates than countries with their own monies business cycles are more highly synchronized across currency union countries than across countries with sovereign monies

hidden child labor determinants of housework and family business work of children in 16 developing countries summary two forms of hidden child labor housework and family business work are studied for 178 000 children in 16 african and asian countries about 30 of african children and 11 of asian children work over 15 h a week in hidden child labor girls are more involved in housework and boys more in family business work but this division is not strict most 80 90 of variation is due to household factors children work less in urban less traditional and more educated areas gender differences are larger in asia probably due to a stricter form of patriarchy

channels of interstate risk sharing united states 1963 1990 we develop a framework for quantifying the amount of risk sharing among states in the united states and construct data that allow us to decompose the cross sectional variance in gross state product into several components which we refer to as levels of smoothing we find that 39 percent of shocks to gross state product are smoothed by capital markets 13 percent are smoothed by the federal government and 23 percent are smoothed by credit markets the remaining 25 percent are not smoothed we also decompose the federal government smoothing into subcategories taxes transfers and grants to states

emporiophobia fear of markets cooperation or competition there is widespread emporiophobia fear of markets and this has important policy implications as it leads voters to demand anti market policies there are many reasons for this anti market attitude however economists could reduce emporiophobia if we stressed cooperation rather than competition in our writings and policy discussions in a sample of introductory textbooks competition is mentioned on average 8 times as often as cooperation the fundamental economic unit is the transaction and transactions are cooperative the benefit of a market economy increased consumer surplus comes from cooperation through transactions not from competition competition in a market economy is competition for the right to cooperate competition is important because it guarantees that the best cooperators will win and because it establishes the efficient terms for cooperation but cooperation is fundamental for most people competition has negative connotations as it focuses on losers while cooperation implies a winwin situation as an example if we say wal mart outcompeted its rivals we think of losing firms being bankrupted if we say wal mart did a better job of cooperating with its customers we think of the benefits created by wal mart economists in our policy and textbook writing should strive to use the second sort of locution not the first other implications involve the morality of the market giving back and characteristics of market failures

blessing and curse the gold boom and local development in colombia abstract i provide a microeconomic channel for the resource curse using the boom in colombian gold mining as a case study identification strategies exploit trend changes in international gold prices after 2002 and regional gold production capabilities as measured by water supply the majority of gold mining in colombia is placer mining and water is important for industrial gold production i find that the gold boom decreases local unemployment in the short term by 3 5 however given the lack of capacity to effectively ban child labor these economic opportunities are also available for children my results indicate that because of the gold boom the probability that a child works increases by 9 3 and school attendance decreases by 23 9 capital accumulation seems to be permanently hurt since the probability that a child is lagging three or more grades behind increases by 9 these effects are only discernible after 2002 the human capital results can be retrieved from different databases furthermore results are robust to a series of robustness checks restricting the sample to gold producers and their neighbors using alternative sets of controls and restricting the sample to non migrants resources are a blessing in the short term but a curse for long term economic growth if human capital is productive

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

consumption risk sharing in china this paper empirically examines the degree of regional consumption risk sharing in china it finds that less risk sharing is taking place across chinese provinces than across us states and canadian provinces although its extent across the latter is somewhat higher than across the national boundaries of industrial countries specifically about half of the fitted annual variation in provincial consumption growth is common to all chinese provinces compared with more than two thirds less than one third in the case of us states and canadian provinces g 7 countries my estimates reveal that chinese households would be willing to pay dearly to insure their consumption against idiosyncratic shocks

relative wage movements and the distribution of consumption we analyze how relative wage movements among birth cohorts and education groups affected the distribution of household consumption and economic welfare our empirical work draws on the best available cross sectional data sets to construct synthetic panel data on u s consumption labor supply and wages during the 1980s we find that low frequency movements in the cohort education structure of pretax hourly wages among men drove large changes in the distribution of household consumption the results constitute a spectacular failure of between group consumption insurance a failure not explained by existing theories of informationally constrained optimal consumption behavior a welfare analysis indicates that the cost of between group consumption variability is larger than the cost of aggregate consumption variability by two orders of magnitude

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

international dynamic risk sharing in this paper we examine the implications of international risk sharing among a set of countries in the presence of market frictions which complicate the instantaneous adjustment to the first order conditions we suggest approximating the consumption streams of countries belonging to the risk sharing coalition in terms of a disequilibrium dynamic model embodying forward looking adjustment econometric methods for estimating and testing the model are discussed empirical analysis of a set of core european countries suggests that once preference parameters are allowed to vary across countries we are able to identify a group of nations that share risks against idiosyncratic permanent income shocks the equilibrium position however is reached after a long adjustment period copyright 2008 john wiley sons ltd

market work and household work as deterrents to schooling in bangladesh summary this research investigates factors that deter bangladeshi children from attending school including market work and household work examined separately the likelihood that a child will be continuously in school is estimated using separate logistic regression models for younger and older boys and girls in urban and rural areas we find that child labor decreases the probability of continuous schooling we demonstrate the importance of examining separate demographic groups as well as separate types of work finally we test the robustness of our results using three alternative measures of schooling and find that our results are robust to these three measures

taxes and international risk sharing abstract we extend a standard model of international risk sharing to include an empirically plausible distortion taxes the tax inclusive theory implies even under full risk sharing a predictable relationship between consumption growth and the consumption and capital income tax rates both within and across countries we find strong empirical evidence in favor of this relationship while idiosyncratic output fluctuations account for substantially more of cross country consumption growth variability than do taxes trends in tax differentials are found to be informative about the dynamic evolution of international risk sharing in particular adjusting for capital taxes reveals a marked improvement in risk sharing over the last three decades that is absent in baseline measures this improvement has been driven by the convergence of average tax rates on capital income across oecd countries toward the united states average capital tax rate

international risk sharing and european monetary unification abstract we explore income and consumption smoothing patterns among european community ec countries and among oecd countries during the period 1966 90 we find that for oecd as well as for ec countries about 40 percent of shocks to gdp are smoothed at the one year frequency with about half the smoothing achieved through national government budget deficits and half by corporate saving at the three year differencing frequency only 25 percent of shocks to gdp are smoothed mainly via government lending and borrowing in the absence of alternative income and consumption smoothing mechanisms the restrictions on budget deficits imposed by the maastricht treaty should be relaxed to allow governments to run large temporary deficits in response to output shocks

understanding child labour beyond the standard economic assumption of monetary poverty child labour is pervasive across sub saharan africa the common assumption is that monetary poverty is its most important cause this paper investigates this hypothesis with empirical evidence by exploring structural geographic monetary demographic cultural seasonal and school supply factors simultaneously that can influence child labour it is a first attempt in the literature to combine quantitative with qualitative methods to identify a broader range of potential factors on the demand and supply side and at the micro and macro levels for why children work in agrarian economies like ghana interviews with the minister of education and with children enrich the multivariate regression results the multiple sources of child labour appear to include in particular the structure of the economy social norms and no returns to rural basic education policy responses are outlined especially on the demand side that are needed to help reduce harmful child labour that affects children s education and later opportunities

the heckscher ohlin and travis vanek theorems under uncertainty abstract the heckscher ohlin theorem is valid under uncertainty of the special benchmark sort modelled by helpman razin their pessimism over its validity is vanquished by more structure rational expectations are imposed on consumers and identical and constant relative aversion to income risk is assumed under these circumstances with free commodity trade the heckscher ohlin theorem holds for the international exchange of equities

incomplete intertemporal consumption smoothing and incomplete risk sharing this paper develops a method to estimate jointly the degree of intertemporal consumption smoothing and the degree of inter regional risk sharing the empirical results for the u s states and oecd and eu countries suggest that i regardless of the assumption on the degree of intertemporal consumption smoothing the degree of risk sharing within a country is larger than across countries ii the degree of intertemporal consumption smoothing within a country is also larger than across countries and iii the difference between the degree of intertemporal consumption smoothing within u s states and across oecd and eu countries is as large as the difference between the degree of risk sharing contrary to the findings of some past studies

risk sharing between and within families this paper uses the panel study of income dynamics to test whether risk sharing is complete between or within american families the tests accommodate a wide variety in the configuration and availability of family data the test results reject inter as well as intra family full risk sharing even assuming that leisure is endogenous or that leisure and consumption are nonseparable

understanding the persistence properties of international macroeconomic aggregates in this paper the ability of a two country model of growth and cycles is evaluated to explain the persistence properties of output and consumption across countries simulated output and consumption levels replicate the observed appearance of noncointegration across countries simulated output growth rates however do not explain the observed positive serial correlation of output growth rates the reallocation of resources in response to technology shocks generates a negative serial correlation for output growth rates

understanding the backus smith puzzle it s the nominal exchange rate stupid backus kehoe and kydland bkk 1992 showed that if international capital markets are complete consumption growth correlations across countries should be higher than their corresponding output growth correlations in stark contrast to the theory however in actual data the consumption growth correlation is lower than the output growth correlation by assuming trade imperfections due to non traded goods backus and smith 1993 showed that there is an additional impediment that works to lower the consumption growth correlation while backus and smith s argument was successful in partially explaining the low growth correlation puzzle it contributed to generating another puzzle because the data forcefully showed that consumption growth is negatively correlated with the real exchange rate which is a violation of the theory in this paper by decomposing the real exchange rate growth of the oecd countries into the nominal exchange rate growth and the inflation differential we find that nominal exchange rate movements are the main source for the backus smith puzzle we find that the nominal exchange rate moves counter cyclically with consumption movements which is a violation of the risk sharing theory with non traded goods we also find that the violations are more pronounced when nominal exchange rate changes are larger in absolute value in contrast the negative of bilateral inflation differentials is positively correlated with bilateral consumption movements the latter finding is in accordance with the theory furthermore using intranational data for the united states where the nominal exchange rate is constant the backus smith puzzle disappears although complete risk sharing is rejected

why is consumption so smooth for thirty years it has been accepted that consumption is smooth because permanent income is smoother than measured income this paper considers the evidence for the contrary position that permanent income is in fact less smooth than measured income so that the smoothness of consumption cannot be straightforwardly explained by permanent income theory the paper argues that in postwar u s quarterly data consumption is smooth because it responds with a lag to changes in income

occupational choices of working children in bangladesh the article looks into the determinants of occupational choices of working children in bangladesh using data from 6668 bangladeshi working children aged 5 through 14 the article estimates several binary and multinomial logit regressions separately for boys and girls the article confirms that most children work in the informal sector where formal sector s jurisdiction and regulations are absent specifically the article finds that children are least likely to work in the service occupation and are more likely to work in the textile sector the findings highlight the diversity in the occupational distribution of child workers by gender and show how their individual and family characteristics influence occupational choices the service sector which comprises of mostly maids is a hidden sector this sector makes children vulnerable to abuse thus it is suggested that policy makers need to come up with effective legislations that would protect the children who work in the hidden informal sector

what can explain the apparent lack of international consumption risk sharing recent research in international business cycles finds that international consumption comovements do not match the risk sharing predictions of standard complete markets models in this paper i ask whether two different types of explanations can help explain this result 1 nonseparabilities between tradables and nontradable leisure or goods and 2 the effects of capital market restrictions on consumption risk sharing i find that risk sharing cannot be resolved by either explanation alone however when i allow for both nonseparabilities and certain market restrictions risk sharing among unrestricted countries cannot be rejected this evidence suggests that a combination of these two effects may be necessary to explain consumption risk sharing across countries

redistribution and risk sharing in italy learning from the past abstractredistribution and risk sharing in italy learning from the past regional studies this paper investigates the role of public policies in italy by assessing both the redistribution and the risk sharing functions of interregional net fiscal flows in the long run its comparative approach allows one to contrast results obtained for two periods characterized by diverse regional policy and dynamics of regional convergence although based on a specific example the evidence supports more general conclusions when assessing the regional redistributive and risk sharing power of national fiscal policies many different factors related to the existing policy regime should be accounted for particularly the distribution of government spending between current expenditure and public investment

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

monopolistic competition and international trade reconsidering the evidence we test some propositions about international trade flows that are derived from models of monopolistic competition developed by elhanan helpman and paul krugman we investigate whether the volume of trade between oecd countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products we then repeat the test with non oecd countries we also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some but not all trade is intraindustry trade our results lead us to question the apparent empirical success of these models

dynamic risksharing in the united states and europe abstract we use a panel var model to improve upon the existing methodologies to analyze interregional risksharing and consumption smoothing channels first we endogenize the output process within a more general multi equation framework capturing the dynamic feedback between output and various smoothing channels second in line with dynamic general equilibrium open economy models of risksharing we exploit impulse response functions to trace the role of each smoothing channel over time in the presence of different structural shocks temporary vs permanent and output vs smoothing channels in the application to the us and oecd countries we find different dynamic properties of different smoothing channels we compare our results with the predictions of standard risksharing and consumption theories and tackle some of the puzzles in the literature such as the international risksharing puzzle and the consumption output correlation puzzle we are also able to address such policy issues as whether fiscal stabilizers have been substitutes or complements for financial market diversification activities and whether further financial market integration is likely to provide countries with more shock absorption tools a key result is the strong substitutability between capital and credit smoothing in the us and between fiscal and credit smoothing in the oecd

limited asset market participation and the consumption real exchange rate anomaly under efficient consumption risk sharing as assumed in standard international business cycle models a country s aggregate consumption rises relative to foreign consumption when the country s real exchange rate depreciates yet empirically relative consumption and the real exchange rate are essentially uncorrelated i show that this consumption real exchange rate anomaly can be explained by a simple model in which a subset of households trade in complete financial markets while the remaining households lead hand to mouth htm lives htm behavior also generates greater volatility of the real exchange rate and of net exports which likewise brings the model closer to the data

government consumption and private consumption correlations abstract this paper examines whether the introduction of government consumption expenditure in a standard one good model of the international real business cycle is sufficient to reconcile the theory with the existing pattern of international consumption and output correlations it is shown that the model can account for existing international correlations only under specific assumptions about the size of effect of government expenditure on agents utility or the variability of government expenditure shocks crucial parameters are identified and the sensitivity of the results discussed 1998 elsevier science ltd all rights reserved

risk sharing within the united states what do financial markets and fiscal federalism accomplish we measure income uncertainty at the level of u s states and the extent to which it has been reduced through risksharing using a method recently developed by athanasoulis and van wincoop 2000 risk is measured as the standard deviation of state specific income growth uncertainty measured by using the error term of a regression of income growth on variables in the information set risk sharing is measured by the extent to which this standard deviation has been reduced through financial markets and federal fiscal policy the advantage of this measure over the existing risk sharing literature is that the interpretation does not depend on many auxiliary assumptions our findings on the extent of risk sharing are insensitive to the only assumption we need to make the variables that are in the information set we find that the standard deviation of state specific income growth uncertainty is reduced by less than half through financial markets and federal fiscal policy we show that the extent of risk sha

risk coping and starvation in rural china we use a 3 year panel from two poor provinces in southern china to examine the nature of risks to which rural households are exposed and their ability to insure calorie consumption and spending of total consumption against idiosyncratic shocks to their income we find that idiosyncratic risks are indeed the main source of income variation in the sample consumption is better insured than total spending unlike total spending where full insurance is rejected in most cases calorie intake is completely insured for both land rich and land poor households in both provinces access to even modest amounts of land significantly enhances households ability to guard against total spending land rich households are much better insured against total spending than land poor households the results are robust across model specifications although generalized method of moments gmm estimations increase the magnitude of difference in total spending between the land rich and the land poor policies targeting poverty red

consumption risk sharing in italy this paper analyses the issue of consumption risk sharing in the 20 italian regions during the period 1983 94 the tests proposed allow for regional specific departures from the hypothesis of complete risk sharing and for the existence of non separabilities among groups of commodities empirical evidence suggests the rejection of the hypothesis of complete consumption risk sharing

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

borrowing constraints and international risk sharing evidence from asymmetric error correction we analyse the adjustment process of consumption growth after disequilibrating output shocks in a sample of organization for economic cooperation and development oecd countries in particular we test the hypothesis that consumption is smoothed to a lesser degree after negative shocks whereas the impact of a positive shock is delayed for a longer period of time our analysis is based on an error correction framework that allows for asymmetric adjustment we find that the mean adjustment lag after a negative shock is significantly shorter than after a positive shock especially since the beginning of the 1980s this result is consistent with the interpretation that borrowing constraints limit the degree to which the impact of negative shocks on consumption can be smoothed

goods and asset market interdependence in a risky world this paper explores the link between international asset markets and international trade in goods to determine whether trade along these dimensions tends to be complementary or plays the role of substitutes international financial markets permit agents in different countries to pool away the idiosyncratic portion of risk while in the absence of international financial markets countries will pursue other means to insure against unanticipated disturbances the author shows that the endogeny of resource allocations to market completeness leads to a relationship of complementarity between trade in goods and trade in assets copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

international risk sharing and commodity prices cole and obstfeld 1991 exposited a classic result where equilibrium movements in the terms of trade could make ex ante risk sharing arrangements unnecessary a unity elasticity of substitution across goods and production specialization this paper extends their model to n countries and m commodities n m here the terms of trade provides insurance against commodity specific shocks not country specific shocks using commodity level production data at the national level and world commodity prices we document significant terms of trade variability and positive responses of nation specific production to terms of trade improvements the endogenous terms of trade insurance mechanism highlighted in co is virtually non existent cole et obstfeld 1991 ont developpe un resultat classique montrant que les mouvements d equilibre dans les termes d echange pouvaient faire l economie d arrangements ex ante pour le partage du risque une elasticite de substitution unitaire entre biens et specialisations dans la production ce texte developpe leur modele pour n pays et m biens n m les termes d echange fournissent l assurance contre les chocs specifiques a certains biens mais non contre les chocs en provenance de certains pays utilisant des donnees de production au niveau des biens au plan national et des prix des biens au niveau mondial on observe une variabilite significative des termes d echange et des reponses positives de la production specifiquement nationale aux ameliorations dans les termes d echange le mecanisme endogene d assurance via les termes d echange mis en lumiere par co est virtuellement non existant

household choices in equilibrium this paper is an empirical investigation of equilibrium restrictions on household consumption and male labor supply it exploits a simple factor structure rationalized by two assumptions that household allocations are pareto optimal and that the labor market is competitive the paper estimates household preferences and tests how well this parsimonious factor structure represents panel data on married couples and time series data on asset returns most of the estimates are roughly comparable to those found in previous work no evidence against the simple factor representation is found and the intertemporal capital asset pricing model is not rejected copyright 1990 by the econometric society

a simple test of consumption insurance are consumers effectively insured against idiosyncratic shocks to income or wealth either by formal institutions such as charities private insurance and government programs or by informal mechanisms such as gifts and loans from relatives friends and neighbors under full insurance consumption growth should be cross sectionally independent of idiosyncratic variables that are exogenous to consumers this proposition is tested by cross sectional regressions of consumption growth on a variety of exogenous variables full insurance is rejected for long illness and involuntary job loss but not for spells of unemployment loss of work due to strike and an involuntary move

what determines the value of corporate votes this paper studies the determinants of the value of voting rights in u s corporations results support the hypothesis that the price of a vote is determined by the expected additional payment vote holders will receive for their votes in case of a control contest the size of this differential payment is a function of the probability that a vote is pivotal in a control contest and the magnitude of the private benefits obtainable by controlling the company simple proxies for these two factors explain up to 30 percent of the variation of the voting premium across companies and through time my findings also suggest that the value of managerial perquisites are at least partially reflected in the price of votes

on the empirics of risk sharing across mena countries in this article we compute the potential welfare gains and the realized gains from risk sharing among middle east and north african mena countries including the oil rich gulf region and the resource scarce economies we find that the overall potential welfare gains across mena countries are positive for all countries under the assumption of full risk sharing the potential welfare gains among the six gulf cooperation council gcc countries are positive even though the magnitudes are smaller compared to those of the rest of the mena region we also quantify the extent of risk sharing for the mena region and show that it is significant for the mena region and its subgroups however we could not find any sign of inter temporal smoothing across the same groups decomposing the aggregate output shocks shows that the extent of risk sharing is significant when only positive output shocks exist across the resource scarce mena economies however we observe that gcc countries share output risks with each oth

risk sharing through capital gains we estimate channels of international risk sharing between european monetary union emu european union and other oecd countries 1992 2007 we focus on risk sharing through savings factor income flows and capital gains risk sharing through factor income and capital gains was close to zero before 1999 but has increased since then risk sharing from capital gains at about 6 is higher than risk sharing from factor income flows for european union countries and oecd countries risk sharing from factor income flows is higher for euro zone countries at 14 reflecting increased international asset and liability holdings in the euro area on examine les canaux de partage international du risque entre l union monetaire europeenne l union europeenne et les autres pays de l ocde 1992 2007 on se concentre sur le partage du risque via les epargnes les flux de revenus des facteurs et les gains de capitaux le partage du risque via les revenus des facteurs et les gains de capitaux a ete presque nul avant 1999 mais s est accru depuis le partage du risque via les gains de capitaux a peu pres 6 est plus grand que le partage du risque via les flux de revenus des facteurs pour les pays de l union europeenne et les pays de l ocde le partage du risque vis les flux de revenus des facteurs est plus eleve pour l euro zone a quelques 14 refletant le fait que les actifs et passifs internationaux detenus dans la zone euro se sont accrus

does child labour displace schooling evidence on behavioral responses to an enrollment subsidy this brief summarizes the results of a gender impact evaluation study entitled does child labour displace schooling evidence on behavioral responses to an enrollment subsidy conducted between 1995 and 1996 in bangladesh the study observed that the subsidy increases schooling but its effect on child labour is ambiguous the subsidy increased schooling by far more than it reduced child labour substitution effects helped protect current incomes from the higher school attendance induced by the subsidy substitution effects helped protect current incomes from the higher school attendance induced by the subsidy the reduction in the incidence of child labour by boys girls represents about one quarter eighth of the increase in their school enrollment rate

trade patterns under uncertainty with country specific shocks the helpman razin model of international trade under uncertainty is extended to allow for country specific productivi ty shocks it is shown that for the multiple sector multiple factor case there exists a set of interesting sufficient conditions under w hich it is possible to predict the pattern of international trade in securities goods and factor content on the basis of cross country d ifferences in factor endowments it is shown that under these circum stances some well known empirical tests have to be modified copyright 1988 by the econometric society

consumption smoothing and housing capital gains evidence from australia canada and new zealand using regional level panel data of three developed countries comprising australia canada and new zealand the study investigates the response of consumption smoothing to housing capital gains t

robust control informational frictions and international consumption correlations abstract in this paper we examine the effects of model misspecification robustness or rb on international consumption correlations in an otherwise standard small open economy model with endogenous capital accumulation we show that in the presence of capital mobility in financial markets rb lowers the international consumption correlations by generating heterogeneous responses of consumption to productivity shocks across countries facing different macroeconomic uncertainty in addition we show that rb can also improve the model s predictions in three other moments of consumption dynamics the relative volatility of consumption to income the persistence of consumption and the correlation between consumption and output after calibrating the rb parameter using the detection error probabilities we show that the model can explain the observed international consumption correlations as well as the other consumption moments quantitatively finally we show that the main conclusions of our benchmark model do not change in an extension in which the agent cannot observe the state perfectly due to finite information processing capacity

risk sharing role of foreign aid in developing countries abstractthe effects of foreign aid on economic growth have been extensively investigated over the past 40 years however even though foreign aid can be a significant source of insurance against do

child labor child schooling and their interaction with adult labor empirical evidence for peru and pakistan using data from peru and pakistan this article tests two hypotheses there is a positive association between hours of child labor and poverty and there is a negative association between child schooling and poverty both of these hypotheses are confirmed by the pakistani data but not by the peruvian data the reduction in poverty rates due to income from children s labor is greater in pakistan than in peru the nature of interaction between adult and child labor markets varies with the gender of the child and the adult in peru rising men s wages significantly reduce the labor hours of girls whereas in pakistan there is a strong complementarity between women s and girls labor markets both data sets agree on the positive role that increasing adult education can play in improving child welfare

economic and cultural forces in the child labour debate evidence from urban bangladesh the relative influence of economic and cultural forces is a key area of debate amongst those exploring the causes of child work and in wider discourse on household labour deployment data from dhaka slums suggest that household poverty and income stability are important economic determinants of children s work however economic forces alone cannot explain child work deployment evidence on the availability of adult household members to replace child contributions and on gender and age differentials in household labour deployment point towards the importance of cultural factors key cultural determinants of children s work include gender norms age subordination and the cultural importance of avoiding idleness

home bias and international risk sharing twin puzzles separated at birth abstract we document that international home bias in debt and equity holdings declined during the period 1993 2003 at the same time as international risk sharing increased using panel data regressions for oecd countries we demonstrate that less home bias is associated with more international risk sharing more generally we show that more financial integration is associated with more risk sharing when we measure financial integration as the ratio of foreign assets to gross domestic product our results indicate that risk sharing and international financial integration are closely related empirical phenomena

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

risk sharing from international factor income explaining cross country differences access to world capital markets and net investment income flows between countries help protect national income from country specific output shocks i empirically study what factors explain cross country differences in the extent of risk sharing from international factor income an index of investor protection is the leading causal variable for the estimated amount of risk sharing over the 1985 to 2004 period improving investor protection in russia to denmark s level implies five times larger risk sharing compared to the sample average these results indicate one possible way to reap large potential benefits from international risk sharing

public employment and regional risk sharing we provide an empirical analysis of regional risk sharing in norway over the period 1977 90 the approach of asdrubali sorensen and yosha 1996 is extended to take public employment into account as a possible shock absorber the other channels of risk sharing are capital markets and commuting taxes and transfers and credit markets the estimated degree of regional consumption insurance is very high we cannot reject the hypothesis that there is full interregional risk sharing in the short term public employment absorbs up to 25 percent of private sector output shocks in our analyses generally central government insurance against regional shocks is relatively more important the more permanent the shocks are and vice versa for market based risk sharing channels