Risk-Sharing Social Networks

In this article we survey basic research problems in the economic literature on social networks for risk sharing. Summaryzed are the economic, as well as the social and demographic factors for the formation of risk sharing social networks. Because of the transaction costs for sustaining relationships (information, eforcement cost, etc.) real-life equilibrium networks generally have less then the optimal number of members from a risk sharing perspective. Research results suggest that in the field formal and informal mechanisms for risk sharing function not only as substitutes, but also as complementaries. Enhancing economic distribution can improve risk sharing through an increased penetration of formal shemes in rural areas.