Friday, November 9, 2012
Risk Sharing: US and EU Compared
Over at VoxEU, Mathias Hoffmann has a very interesting piece comparing risk sharing among US states compared with risk sharing among member states of the EU. One recommendation that follows from his argument is that European integration could be furthered without complex and politically impossible treaty modifications by taking steps to encourage more cross-border equity ownership in Europe. Currently, European investment takes the form primarily of direct investment or bank borrowing by large firms. Trans-European stock ownership is feeble compared to the US. For Hoffmann, equity ownership is one channel via which asymmetrical shocks can be alleviated by transmission to other states. Worth reading.