Globalization and International Risk-sharing: The Role of Social and Political Integration

This study explores the relationships among various dimensions of globalization (i.e., economic, social, and political) and international risk-sharing, by exploiting the KOF globalization indices over a long time horizon (1970-2014) and for several groups of countries (i.e., World; Organisation for Economic Cooperation and Development (OECD); European Union (EU); European Monetary Union (EMU); high-income economies (HI); and low and middle-income economies (LMI)). To this end, we follow a standard regression-based approach augmented by interaction terms. To date, the empirical literature has only investigated the economic and financial facets of globalization; we, on the other hand, find a significant relationship between risk-sharing and noneconomic aspects of globalization. For several groups of industrialized countries, social and political integration positively correlate with risk-sharing. The economic factor does not explain all the improvements that relate to globalization, and political integration plays a remarkable role in shaping risk-sharing opportunities, both among EMU/EU countries and on a global scale. For advanced economies, in an increasingly globalized world, political integration should be of great concern.

BALLI Faruk;  PERICOLI Filippo;  PIERUCCI Eleonora; 

2018-03-06

ELSEVIER SCIENCE INC

JRC109467

0176-2680,   

https://www.sciencedirect.com/science/article/pii/S0176268017300976?via%3Dihub,    https://publications.jrc.ec.europa.eu/repository/handle/JRC109467,   

10.1016/j.ejpoleco.2017.12.006,