REGIONAL RISKSHARING

This paper studies a variety of moments associated with the degree of risksharing for a set of 47 Japanese regions. The moments are compared to those for a group of 20 OECD countries. One striking observation i s a low average consumption correlation across regions, exactly identi cal to that across countries. The paper aims at understanding this fin ding within the context of a multi-region model with two types of agen ts, capital owners and labor. Capital owners hold well diversified cla ims across the regions, while labor has at most access to a riskless b ond. The model can account for the observed low average consumption co rrelation across regions, although its ability to account for a variet y of other 'risksharing moments' is mixed. The model is also able to g enerate a consumption variability of capital owners that is significan tly higher than that of workers, consistent with a finding by Mankiw a nd Zeldes for US stockholders and non-stockholders.