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Public Employment and Regional Risk Sharing: Norway 1977-90

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  • Egil Matsen

    (Department of Economics, Norwegian University of Science and Technology)

  • Lars-Erik Borge

    (Department of Economics, Norwegian University of Science and Technology)

Abstract

We provide an empirical analysis of regional risk sharing in Norway over the period 1977-90. The approach of Asdrubali, Sørensen and Yosha (1996) is extended to take account of public employment as a possible shock absorber. The other channels of risk sharing are capital markets & commuting, taxes & transfers and credit markets. Surprisingly, there seems to be full interregional risk sharing in the short run, with public employment absorbing about 20 % of regional shocks to private output. The combined effect of capital markets & commuting is even more important, however, absorbing up to 70 % of regional shocks. In the longer run, a significant fraction of regional shocks remain unsmoothed. Government smoothing increases and market based smoothing decreases as shocks become more permanent.

Suggested Citation

  • Egil Matsen & Lars-Erik Borge, 2001. "Public Employment and Regional Risk Sharing: Norway 1977-90," Working Paper Series 0802, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:0802
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    References listed on IDEAS

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