TY  - JOUR
AU  - Dumas,Bernard
AU  - Uppal,Raman
TI  - Global Diversification, Growth and Welfare with Imperfectly Integrated Markets for Goods
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 6994
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w6994
L1  - http://www.nber.org/papers/w6994.pdf
N1  - Author contact info:
Bernard Dumas
INSEAD
boulevard de Constance
77305 Fontainebleau Cedex
FRANCE
Tel: +33 1 60 72 43 73
Fax:  +33 1 60 72 40 50
E-Mail: bernard.dumas@insead.edu

Raman Uppal
EDHEC Business School
10 Fleet Place, Ludgate
London EC4M 7RB
United Kingdom
Tel: +44 20 7871 6740
E-Mail: ruppal@mac.com
AB  - In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through that, on the investment in risky projects, welfare and growth.  We find that the welfare gain of financial market openness is not monotonic with respect to investors' risk aversion and the aggregate volatility of output growth.  Our main result is that the welfare gain from integration is not drastically reduced by the presence of goods market imperfections, modeled as a cost of transferring goods from one country to the other.  Hence, financial market integration may be a worthwhile goal to pursue even at a time when full goods mobility has not been achieved.
ER  -