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Risk-sharing networks and insurance against illness

  • De Weerdt, Joachim
  • Dercon, Stefan

Most risk-sharing tests on developing country data are conducted at the level of the village; generally, the full risk-sharing hypothesis is rejected. This paper uses detailed data on all insurance networks within a village in Tanzania; networks are not clustered but largely overlapping. We test whether full risk-sharing occurs within these networks. We find that even within these smaller networks risk is not fully shared. In the event of a health shock, households reduce overall consumption: they cut back non-food consumption by roughly 30%, while protecting their food consumption.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 81 (2006)
Issue (Month): 2 (December)
Pages: 337-356

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Handle: RePEc:eee:deveco:v:81:y:2006:i:2:p:337-356
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