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Risk Pooling, Risk preferences, and Social Networks

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Author Info

  • Orazio Attansio
  • Abigail Barr
  • Juan Camilo Cardenas
  • Garance Genicot
  • Costas Mehgir

Abstract

Using date from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes. Also, consistent with our theoretical finding that when there is a problem of trust the process of pooling assortativley with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals.

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File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2009-20text.pdf
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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2009-20.

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Date of creation: 2009
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Handle: RePEc:csa:wpaper:2009-20

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Keywords: Field experiment; risk sharing; social sanctions; Insurance; Group formation: matching.;

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References

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  1. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, vol. 81(2), pages 337-356, December.
  2. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  3. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  4. Attila Ambrus & Markus Mobius & Adam Szeidl, 2010. "Consumption Risk-sharing in Social Networks," NBER Working Papers 15719, National Bureau of Economic Research, Inc.
  5. Sergio Currarini & Paolo Pin & Matthew O. Jackson, 2007. "An Economic Model of Friendship: Homophily, Minorities and Segregation," Working Papers 2007_20, Department of Economics, University of Venice "Ca' Foscari".
  6. Patrick Legros & Andrew F. Newman, 2003. "Beauty is a Beast, Frog is a Prince: Assortative Matching with Nontransferabilities," Economics Working Papers 0030, Institute for Advanced Study, School of Social Science.
  7. Chowdhury, Prabal Roy, 2007. "Group-lending with sequential financing, contingent renewal and social capital," Journal of Development Economics, Elsevier, vol. 84(1), pages 487-506, September.
  8. Bloch, Francis & Genicot, Garance & Ray, Debraj, 2008. "Informal insurance in social networks," Journal of Economic Theory, Elsevier, vol. 143(1), pages 36-58, November.
  9. Yann Bramoullé & Rachel Kranon, 2005. "Risk-Sharing Networks," Cahiers de recherche 0526, CIRPEE.
  10. Stefan Dercon & Tessa Bold, 2004. "Group-based Funeral Insurance in Ethiopia and Tanzania," Economics Series Working Papers WPS/2004-27, University of Oxford, Department of Economics.
  11. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
  12. Gubert, Flore & Fafchamps, Marcel, 2007. "The Formation of Risk Sharing Networks," Economics Papers from University Paris Dauphine 123456789/4392, Paris Dauphine University.
  13. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
  14. Chade, Hector, 2006. "Matching with noise and the acceptance curse," Journal of Economic Theory, Elsevier, vol. 129(1), pages 81-113, July.
  15. de Janvry, Alain & Sadoulet, Elisabeth & Winters, Paul C. & Murgai, Rinku, 2000. "Localized and Incomplete Mutual Insurance," Working Papers 12905, University of New England, School of Economics.
  16. Abigail Barr & Marleen Dekker & Marcel Fafchamps, 2012. "Who Shares Risk with Whom under Different Enforcement Mechanisms?," Economic Development and Cultural Change, University of Chicago Press, vol. 60(4), pages 677 - 706.
  17. Chung, Kim-Sau, 2000. "On the Existence of Stable Roommate Matchings," Games and Economic Behavior, Elsevier, vol. 33(2), pages 206-230, November.
  18. Ghatak, Maitreesh, 1999. "Group lending, local information and peer selection," Journal of Development Economics, Elsevier, vol. 60(1), pages 27-50, October.
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Citations

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Cited by:
  1. Wendy Janssens & Berber Kramer, 2012. "The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination," Tinbergen Institute Discussion Papers 12-145/V, Tinbergen Institute, revised 23 Jan 2014.
  2. Catia Batista & Dan Silverman & Dean Yang, 2013. "Directed Giving: Evidence from an Inter-Household Transfer Experiment," CReAM Discussion Paper Series 1321, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  3. Simone Gobien & Björn Vollan, 2013. "Playing with the social network: Social cohesion in resettled and non-resettled communities in Cambodia," MAGKS Papers on Economics 201331, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  4. Daniela Di Cagno & Emanuela Sciubba & Marco Spallone, 2012. "Choosing a gambling partner: testing a model of mutual insurance in the lab," Theory and Decision, Springer, vol. 72(4), pages 537-571, April.
  5. Anderies, John M. & Janssen, Marco A. & Bousquet, François & Cardenas, Juan-Camilo & Castillo, Daniel & Lopez, Maria-Claudio & Tobias, Robert & Vollan, Björn & Wutich, Amber, 2011. "The challenge of understanding decisions in experimental studies of common pool resource governance," Ecological Economics, Elsevier, vol. 70(9), pages 1571-1579, July.
  6. Charness, Gary & Viceisza, Angelino, 2011. "Comprehension and risk elicitation in the field: Evidence from rural Senegal," IFPRI discussion papers 1135, International Food Policy Research Institute (IFPRI).
  7. Gobien, Simone & Vollan, Björn, 2013. "Playing with the Social Net: Solidarity Differences in Resettled and Non-Resettled Communities in Cambodia," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79985, Verein für Socialpolitik / German Economic Association.
  8. Wendy Janssens & Berber Kramer, 2012. "The Social Dilemma of Microinsurance: A Framed Field Experiment on Free-Riding and Coordination," Tinbergen Institute Discussion Papers 12-145/V, Tinbergen Institute, revised 23 Jan 2014.

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