Title: Risk and global economic architecture
Description: "This paper provides a general framework for analyzing the optimal degree and form of financial integration.  Full integration is not in general optimal: faced with a choice between two polar regimes, full integration or autarky, autarky may be superior.  The intuition is simple: if underlying technologies are not convex, then risk-sharing can lower expected utility.  The simplistic models arguing for financial integration typically employed in economics assume convexity; but the world is rife with non-convexities, e.g.  associated with bankruptcy.  The architecture of the credit market can, for instance, affect the likelihood of a bankruptcy cascade, "contagion," and systemic risk"--National Bureau of Economic Research web site.