Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Asset price data imply a large degree of international risk sharing, while aggregate consumption data do not. We show that a model with trade in goods and endogenously segmented asset markets can account for this puzzling discrepancy. Active households—who pay a fixed cost to transfer money into or out of assets—share risk within and across countries, and their marginal utility growth prices assets, so asset prices imply high risk sharing. Inactive households consume their current income and do not share risk, so aggregate consumption (which averages across all households) reflects lower risk sharing. The model also provides a resolution to the Backus-Smith-Kollmann puzzle.