Jüßen, Falko2006-11-102006-11-102006-11-10JEL classification: E63, O47, R11, H23http://hdl.handle.net/2003/2307510.17877/DE290R-8025This paper provides empirical evidence of interregional risk sharing in reunified Germany. The focus is on two related questions: First, to what extent do private institutions and the public sector provide insurance against asymmetric shocks to individual regions? Second, to what extent does the public sector reduce long-term differences between regions? While the federal government channel is not found to have a stabilizing effect, private factor income flows provide almost complete insurance against short-term shocks. In sharp contrast, the fiscal transfer system achieves a substantial reduction of long-term disparities between regions. These results show that fiscal transfers in reunified Germany are mainly concerned with redistribution in favor of depressed regions rather than providing insurance against idiosyncratic shocks.enDistribution dynamicsFiscal redistributionInterregional risk sharingRegional disparities004report