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Daniel Stempel
''Risk Sharing Heterogeneity in the United States''
( 2021, Vol. 41 No.3 )
Several studies document high risk sharing against output fluctuations in the United States. Building on these studies, this note documents substantial heterogeneity in interstate risk sharing between US states. Using a panel data set ranging from 1963 to 2013, aggregate and state-specific risk sharing profiles are estimated. Moreover, four distinct clusters of states, each characterized by a unique risk sharing profile emphasizing one specific consumption insurance channel, are derived. This note then shows that this heterogeneity in insurance levels and profiles is related to differences in state characteristics, such as the composition of state output, insurance opportunities, vulnerability to idiosyncratic shocks, and the capacity to finance countercyclical policies.
Keywords: Risk Sharing, Consumption Insurance, Heterogeneity, Monetary Union
JEL: E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment: General (includes Measurement and Data)
F4 - Macroeconomic Aspects of International Trade and Finance: General
Manuscript Received : Dec 07 2020 Manuscript Accepted : Jul 18 2021

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