We show empirically that regions with a more specialized production structure exhibit output fluctuations that are less correlated with those of other regions (less ‘symmetric’ fluctuations). Combined with the causal relation running from capital market integration to regional specialization found in an earlier study, this finding supports the idea that higher capital market integration leads to less symmetric fluctuations. This mechanism counterbalances the effect of lower trade-barriers on the symmetry of fluctuations quantified by Frankel and Rose (1998). Deriving a simple closed form expression for the gains from risk sharing for CRRA utility is an independent contribution of the present article.  2001 Elsevier Science B.V. All rights reserved.