Labour market rigidities, financial integration and international risk sharing in the OECD

Arbeitspapier

Economic theory predicts that consumption growth rates should be highly correlated across countries. Empirical evidence overwhelmingly rejects this prediction. We examine whether increased financial integration and labour market rigidities can help explain this apparent contradiction between theory and empirics. Using data for OECD countries we show that although financial integration has a limited impact upon cross-country consumption correlations, labour market rigidities significantly increase consumption correlations. The results suggest that labour market rigidities improve the allocation of consumption risks either by shifting risk from employees to firms and shareholders or because it makes future income streams easier to use as collateral.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 2028

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Economic Integration ; Macroeconomics: Consumption; Saving; Wealth
• Subject: Gesamtwirtschaftlicher Konsum ; Konjunkturzusammenhang ; Arbeitsmarktflexibilisierung ; Internationaler Finanzmarkt ; Marktintegration ; Direktinvestition ; Schätzung ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fidrmuc, Jarko ; Foster, Neil ; Scharler, Johann
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/26073
• Last update: 10.03.2025, 11:44 AM CET