The sharing of losses across state borders in the United States absorbs around 40% of an economic shock.4 Saving and lending could represent another channel of private economic risk sharing. Enterprises and households take out loans in different US states during an economic downturn to bridge a slump in earnings.
In the United States, this type of risk sharing smoothes something like 25% of a shock. To some extent, this includes a contribution of the Federal Deposit Insurance Corporation to this form of risk sharing. In Europe, however, the conditions for putting in place a similar euro-area-wide deposit insurance mechanism are not yet met.