Crowding out crowd support? Substitution between formal and informal insurance

Interpersonal gifts and loans play an underexplored informal insurance role in high-income countries, posing challenges for social insurance policy design. I examine informal support via person-to-person (P2P) payment platforms using a survey-linked administrative bank transaction dataset covering low-income US users with job loss. Event study estimates show average monthly P2P inflows increase by 1.1 % of lost income one month after job loss before returning to baseline over 10 months. Single mothers receive the largest increases, as do those with high prior earnings or those living in high-income areas. Exploiting three plausibly exogenous changes to federal pandemic UI policy, I estimate that an additional dollar of UI benefits crowds out at most $0.05 of informal transfers. These results imply that UI can raise welfare by pooling risk across networks without reducing within-network risk pooling through informal insurance.