Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/35071
Authors: 
Jüßen, Falko
Year of Publication: 
2008
Series/Report no.: 
IZA Discussion Papers 3374
Abstract: 
Financial markets provide imperfect insurance of labor income risk. However, workers can partly insure against labor market risk by commuting to adjacent regions. Since commuters own wage claims to output produced in adjacent regions, the business cycle in the neighborhood becomes a relevant risk factor at the regional level. In our empirical analysis for US states, we show this effect to be important. State-specific consumption comoves with business cycle shocks that hit adjacent states, in particular if a state is integrated by commuter flows. This labor market perspective on regional risk sharing complements previous studies that investigated risk sharing through financial markets.
Subjects: 
Risk sharing
consumption smoothing
commuting
labor market risk
JEL: 
E21
Document Type: 
Working Paper

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