International Risk Sharing and Globalization

The main research question of this empirical work is whether or not globalization, in its various forms, has had an impact upon international risk sharing. The empirical literature so far has only investigated on one aspect of globalization: economic and financial integration. By decomposing globalization in its economic, political and social aspects, and using a standard framework of consumption insurance tests to gauge the extent of risk sharing among countries, we obtain some interesting results. One of the main findings is that economic and social integration help better cope with idiosyncratic risk, but also that without political integration this might result in an increasing exposure to systemic (uninsurable) risk.