How big are potential welfare gains from international risksharing?

There is extensive evidence that risksharing across countries is far from perfect. Some have attributed this to small benefits from risksharing. Gains from riskpooling that have been reported range from negligible to enormous. This paper documents to what extent the results are sensitive to the parameterization of preferences, the stochastic process of the endowment, and its measurement. We find that gains from risksharing are quite sizable for realistic assumptions about the underlying factors. For OECD countries they are equivalent to a permanent increase in tradables consumption in the range of 1.1 to 3.5% for a 50 year horizon, and 2.5 to 7.4% for a 100 year horizon. (C) 1999 Elsevier Science B.V. All rights reserved.