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The formation of risk sharing networks

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  • Fafchamps, Marcel
  • Gubert, Flore

Abstract

This paper examines the endogenous formation of risk sharing networks in the rural Philippines. We show that geographic proximity is a major determinant of interpersonal relationships. We find little evidence that people form relationships to pool income risk. The existence of a pre-existing relationship between two individuals is a major determinant of subsequent gifts and informal loans between them, controlling for other proximity factors. From this we conclude that these transfers and informal loans are embedded in interpersonal relationships. These relationships are largely determined by proximity factors and are only weakly the result of purposeful diversification of income risk. There is, however, some evidence that the formation of risk sharing links is aimed at pooling health risk. The paper also makes a methodological contribution to the estimation of dyadic models.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 83 (2007)
Issue (Month): 2 (July)
Pages: 326-350

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Handle: RePEc:eee:deveco:v:83:y:2007:i:2:p:326-350

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  2. Quisumbing, A.R., 1991. "Intergenerational Transfers in Philippine Rice Villages: Gender Differences in Traditional Inheritance Customs," Papers 632, Yale - Economic Growth Center.
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  5. Oriana Bandiera & Imran Rasul, 2002. "Social networks and technology adoption in Northern Mozambique," LSE Research Online Documents on Economics 3539, London School of Economics and Political Science, LSE Library.
  6. Marcel Fafchamps & Flore Gubert, 2002. "Contingent Loan Repayment in the Philippines," Working Papers DT/2002/14, DIAL (Développement, Institutions et Mondialisation).
  7. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
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  22. Marcle Fafchamps, 1999. "Risk sharing and quasi-credit," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(3), pages 257-278.
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  31. repec:dgr:uvatin:2004001 is not listed on IDEAS
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Missing links, missing markets: The transformation process of rural societies
    by Dany Jaimovich - Bakary Baludin in Development Therapy on 2012-10-31 17:28:00
  2. Cool New Paper on the Transition from a Gift to a Market Economy
    by Marc F. Bellemare in Marc F. Bellemare on 2012-11-09 10:00:56
  3. Enlaces perdidos - mercados inexistentes: El proceso de transformación de las economías rurales
    by Dany Jaimovich - Bakary Baludin in Development Therapy on 2012-11-19 22:56:00
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