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Social Network Structure and Risk Sharing in Villages

Author

Listed:
  • Yang Ou

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, 111 Barry StreetCarlton VIC 3053, Australia)

  • Jiang Bin
  • Sung Kim Jun
  • Li Chuhui

    (Econometrics and Business Statistics, Monash University, 20 Chancellors WalkClayton VIC 3800, Australia)

Abstract

This paper studies how the structure of friendship networks affects risk sharing in villages. Using techniques for partially identified econometric models, we construct a sharp bound on the true risk-sharing rate, which takes into account nomination errors in survey responses, and implement interval estimation. We show that the diameter of a network has a negative and significant impact on risk sharing. Our result implies that policymakers can effectively improve risk sharing between households by adopting policies that increase the network connectivity of individuals in the periphery of the social network.

Suggested Citation

  • Yang Ou & Jiang Bin & Sung Kim Jun & Li Chuhui, 2018. "Social Network Structure and Risk Sharing in Villages," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-7, July.
    • Handle: RePEc:bpj:bejeap:v:18:y:2018:i:3:p:7:n:6
    DOI: 10.1515/bejeap-2017-0263
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    References listed on IDEAS

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    1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
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    3. Matthew O. Jackson & Tomas Rodriguez-Barraquer & Xu Tan, 2012. "Social Capital and Social Quilts: Network Patterns of Favor Exchange," American Economic Review, American Economic Association, vol. 102(5), pages 1857-1897, August.
    4. Nicoletti, Cheti & Peracchi, Franco & Foliano, Francesca, 2011. "Estimating Income Poverty in the Presence of Missing Data and Measurement Error," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 61-72.
    5. Arie Beresteanu & Francesca Molinari, 2008. "Asymptotic Properties for a Class of Partially Identified Models," Econometrica, Econometric Society, vol. 76(4), pages 763-814, July.
    6. Thomas, Jonathan & Worrall, Tim, 1990. "Income fluctuation and asymmetric information: An example of a repeated principal-agent problem," Journal of Economic Theory, Elsevier, vol. 51(2), pages 367-390, August.
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