TY  - JOUR
AU  - Ventura,Jaume
AU  - Broner,Fernando A.
TI  - Globalization and Risk Sharing
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12482
PY  - 2006
Y2  - August 2006
UR  - http://www.nber.org/papers/w12482
L1  - http://www.nber.org/papers/w12482.pdf
N1  - Author contact info:
Jaume Ventura
CREI
Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005-Barcelona
SPAIN
Tel: +34 93 542 1765
Fax: +34 93 542 1860
E-Mail: jventura@crei.cat

Fernando Broner
CREI and Universitat Pompeu Fabra
Ramon Trias Fargas, 25-27
08005 Barcelona
Spain
Tel: +34-935422601
Fax: +34-935421860
E-Mail: fbroner@crei.cat
AB  - This paper presents a theoretical study of the e¤ects of globalization on risk sharing and welfare. We model globalization as a gradual and exogenous increase in the fraction of goods that are tradable. In the absence of frictions, globalization opens new goods markets and raises welfare. We assume, however, that countries cannot commit to pay their debts. Unlike the previous literature, and motivated by changes in the institutional setup of emerging-market borrowing, we also assume that countries cannot discriminate between domestic and foreign creditors when paying their debts. Although globalization still opens new goods markets, we find that it can also open or close some asset markets. The net e¤ect on risk sharing and welfare of this process of creation and destruction of markets might be either positive or negative depending on a variety of factors that the theory highlights.
ER  -