Risk-Sharing Networks among Households in Rural Ethiopia
AbstractWe apply the set-up of limited commitment model to empirically test the role of informal risk-sharing networks using panel data on informal credit transactions from rural Ethiopia. The empirical estimates provide convincing evidence for the belief that enforcement problem limits the direct role of credit transactions in risk-sharing arrangements between rural households, whether the villages are ethnically homogeneous or not. We also find that households with more land have better access to the informal credit market and access is significantly improved through their participation in small group networks. But the informal credit market and the networks under consideration serve little purpose to the land poor households. These results, therefore, imply that full risk-sharing does not appear to materialize at the village level.
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Bibliographic InfoPaper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0305.
Date of creation: Mar 2003
Date of revision:
Risk-sharing; Limited commitment; Informal credit; Consumption smoothing;
Other versions of this item:
- Daniel Ayalew, 2003. "Risk Sharing Networks among Households in Rural Ethiopia," Economics Series Working Papers WPS/2003-04, University of Oxford, Department of Economics.
- Daniel Ayalew, 2003. "Risk-sharing networks among households in rural Ethiopia," CSAE Working Paper Series 2003-04, Centre for the Study of African Economies, University of Oxford.
- Daniel Ayalew, 2004. "Risk-Sharing Networks among Households in Rural Ethiopia," Development and Comp Systems 0409029, EconWPA.
- D91 - Microeconomics - - Intertemporal Choice - - - Intertemporal Household Choice; Life Cycle Models and Saving
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
This paper has been announced in the following NEP Reports:
- NEP-AFR-2008-04-12 (Africa)
- NEP-AGR-2008-04-12 (Agricultural Economics)
- NEP-ALL-2008-04-12 (All new papers)
- NEP-MFD-2008-04-12 (Microfinance)
- NEP-NET-2008-04-12 (Network Economics)
- NEP-SOC-2008-04-12 (Social Norms & Social Capital)
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- Bigsten, Arne & Shimeles, Abebe, 2004. "Dynamics of Poverty in Ethiopia," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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