Economic theory emphasizes that risk sharing makes it possible to exploit benefits from comparative advantages and economies of scale. An estimated regional-specific index of risk sharing is used as a covariate in a model of industrial specialization. Allowing for nonlinearities and spatial dependence, we show that industrial specialization is positively affected by risk-sharing measures even controlling for other relevant regressors.
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Basile et al. (2009) studied this question.
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