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Risk Pooling, Risk Preferences, and Social Networks

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  • Abigail Barr
  • Orazio Attanasio

Abstract

Using data 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 assortatively 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 University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2009-20.

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Date of creation: 01 Nov 2009
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Handle: RePEc:oxf:wpaper:csae-wps/2009-20

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Related research

Keywords: Field experiment; Risk sharing; Social sanctions; Insurance; Group Formation; Matching;

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  1. Attila Ambrus & Markus Mobius & Adam Szeidl, 2007. "Consumption Risk-sharing in Social Networks," Economics Working Papers 0079, Institute for Advanced Study, School of Social Science.
  2. Prabal Roy Chowdhury, 2006. "Group-lending with sequential financing, contingent renewal and social capital," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 06-01, Indian Statistical Institute, New Delhi, India.
  3. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  4. Stefan Dercon & Joachim De Weerdt, 2002. "Risk-sharing Networks and Insurance against illness," Economics Series Working Papers WPS/2002-16, University of Oxford, Department of Economics.
  5. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
  6. Stefan Dercon & Tessa Bold & Joachim De Weerdt & Alula Pankhurst, 2004. "Group-based Funeral Insurance in Ethiopia and Tanzania," CSAE Working Paper Series 2004-27, Centre for the Study of African Economies, University of Oxford.
  7. Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Economics Series Working Papers GPRG-WPS-037, University of Oxford, Department of Economics.
  8. 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.
  9. Patrick Legros & Andrew F. Newman, 2002. "Beauty is a Beast, Frog is a Prince: Assortative Matching with Nontransferabilities," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-149, Boston University - Department of Economics, revised Nov 2004.
  10. Chung, Kim-Sau, 2000. "On the Existence of Stable Roommate Matchings," Games and Economic Behavior, Elsevier, vol. 33(2), pages 206-230, November.
  11. Bramoullé, Yann & Kranton, Rachel, 2007. "Risk-sharing networks," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 275-294.
  12. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  13. Francis Bloch (GREQAM and Universite de la Mediterranee), Garance Genicot (Georgetown University, and Debraj Ray (New York University and Instituto de Analisis Economico (CSIC)), 2004. "Informal Insurance in Social Networks," Working Papers gueconwpa~04-04-16, Georgetown University, Department of Economics.
  14. 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.
  15. 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".
  16. Chade, Hector, 2006. "Matching with noise and the acceptance curse," Journal of Economic Theory, Elsevier, vol. 129(1), pages 81-113, July.
  17. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 87-113, January.
  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. Batista, Catia & Silverman, Dan & Yang, Dean, 2013. "Directed Giving: Evidence from an Inter-Household Transfer Experiment," IZA Discussion Papers 7629, Institute for the Study of Labor (IZA).
  2. 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.
  3. 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.
  4. 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).
  5. 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).
  6. 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.
  7. 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.
  8. 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.

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