A note on risk sharing against idiosyncratic shocks and geographic mobility in Japan

Yamada, Tomoaki (2014): A note on risk sharing against idiosyncratic shocks and geographic mobility in Japan.

Abstract

In this study, using Japanese household panel data, we analyze how well idiosyncratic income risks are shared by regions. We find that geographic mobility influences individual consumption growth rates, suggesting that complete asset markets fail to exist. We reject the full insurance hypothesis for both urban and rural areas and find that the extent of risk sharing differs significantly by region.

• Item Type: MPRA Paper
• Language: English
• Keywords: Risk sharing; Consumption insurance; Geographic mobility
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E21 - Consumption ; Saving ; Wealth

References

Artis, M., Okubo, T., 2011. The intranational business cycle in Japan. Oxford Economic Papers, 63, 111--133.

Cochrane, J., 1991. A simple test of consumption insurance. Journal of Political Economy, 99, 957--976.

Guvenen, F. 2011. Macroeconomics with heterogeneity: a practical guide. Federal Reserve Bank of Richmond's Economic Quarterly, 97, 255--326.

Hayashi, F., Altonji, J., Kotlikoff, L. 1996. Risk sharing between and within families. Econometrica, 64, 261--294.

Hess, G., Shin, K., 2000. Risk sharing by households within and across regions and industries. Journal of Monetary Economics, 45, 533--560.

Kohara, M., Ohtake, F., Saito, M., 2002. A test of the full insurance hypothesis: the case of Japan. Journal of the Japanese and International Economies, 16, 335--352.

Mace, B., 1991. Full insurance in the presence of aggregate uncertainty. Journal of Political Economy, 99, 928--956.

Mazzocco, M., Saini, S., 2012. Testing Efficient risk sharing with heterogeneous risk preferences. American Economic Review, 102, 428--468.

Moretti, E., 2012. The New Geography of Jobs. Houghton Mifflin Harcourt, New York.

Ravallion, M. and S. Chaudhuri, 1997. Risk and insurance in village India: comment. Econometrica, 65, 171--184.

Schulhofer-Wohl, S., 2011. Heterogeneity and tests of risk sharing. Journal of Political Economy, 119, 925--958.

Yamada, T., 2013. Cross-sectional facts in Japan using the Keio household panel survey. MPRA Paper, No. 49813.