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The formation of risk sharing networks

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  • Fafchamps, Marcel
  • Gubert, Flore

Abstract

This paper examines the formation of risk sharing networks in the rural Philippines. We find that geographic proximity–possibly correlated with kinship–is a major determinant of mutual insurance links among villagers. Age and wealth differences also play an important role. In contrast, income correlation and differences in occupation are not determinants of network links. Reported network links have a strong effect on subsequent gifts and loans. Gifts between network partners are found to respond to shocks and to differences in health status. From this we conclude that intra-village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income 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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Citations

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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