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The Formation of Risk Sharing Networks

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  • Gubert, Flore
  • Fafchamps, Marcel

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

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4392.

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Date of creation: Jul 2007
Date of revision:
Publication status: Published in Journal of Development Economics, 2007, Vol. 83, no. 2. pp. 326-350.Length: 24 pages
Handle: RePEc:dau:papers:123456789/4392

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Related research

Keywords: partage du risque; modèle dyadique; dyadic model; Philippines; Network; risk-sharing; Réseau;

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References

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  1. Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
  2. Marcel Fafchamps & Flore Gubert, 2007. "Contingent Loan Repayment in the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 633-667.
  3. Bandiera, Oriana & Rasul, Imran, 2002. "Social Networks and Technology Adoption in Northern Mozambique," CEPR Discussion Papers 3341, C.E.P.R. Discussion Papers.
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  20. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, December.
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  31. Mattia Romani, 2003. "Love Thy Neighbour? Evidence from Ethnic Discrimination in Information Sharing within Villages in C�te d'Ivoire," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(4), pages 533-563, December.
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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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