New Working Paper on Risk Sharing Schemes Published by Dr. Liqun Liu

Dec 09, 2019
Summary: A new working paper by PERC Research Scientist Liqun Liu, along with coauthors Darong Dai and Guoqiang Tian, theoretically studies the design and implementation of optimal insurance provision to sub-national regions against privately observable shocks. The authors focus on the joint design of two widely-adopted public risk-sharing schemes, specifically intergovernmental grants, which provide insurance across regions, and public debt, which provides insurance across generations. This paper is the first to include the joint design of these two risk-sharing schemes and the formal analysis of their interaction in the course of implementing optimum welfare in the literature of regional insurance provision within federations.
Click here to read the full working paper, “Optimal Regional Provision: Do Federal Transfers Complement Local Debt?”