Heterogeneity and risk sharing in village economies
We show how to use panel data on household consumption to directly estimate households' risk preferences. Specifically, we measure heterogeneity in risk aversion among households in Thai villages using a full risk‐sharing model, which we then test allowing for this heterogeneity. There is substantial, statistically significant heterogeneity in estimated risk preferences. Full insurance cannot be rejected. As the risk‐sharing as‐if‐complete‐markets theory might predict, estimated risk preferences are unrelated to wealth or other characteristics. The heterogeneity matters for policy: Although the average household would benefit from eliminating village‐level risk, less‐risk‐averse households that are paid to absorb that risk would be worse off by several percent of household consumption.
Volume (Year): 5 (2014)
Issue (Month): (03)
|Contact details of provider:|| Phone: 1 212 998 3820|
Fax: 1 212 995 4487
Web page: http://www.qeconomics.org
More information through EDIRC
|Order Information:|| Web: https://www.econometricsociety.org/membership Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maurizio Mazzocco & Shiv Saini, 2012. "Testing Efficient Risk Sharing with Heterogeneous Risk Preferences," American Economic Review, American Economic Association, vol. 102(1), pages 428-68, February.
- Dumas, Bernard, 1989. "Two-Person Dynamic Equilibrium in the Capital Market," Review of Financial Studies, Society for Financial Studies, vol. 2(2), pages 157-88.
- Shawn Cole & Xavier Gine & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2013.
"Barriers to Household Risk Management: Evidence from India,"
American Economic Journal: Applied Economics,
American Economic Association, vol. 5(1), pages 104-35, January.
- Robert M. Townsend & Shawn Cole & Jeremy Tobacman & Xavier Gine & James Ian Vickery & Petia Topalova, 2012. "Barriers to Household Risk Management; Evidence from India," IMF Working Papers 12/195, International Monetary Fund.
- Cole, Shawn & Gine, Xavier & Tobacman, Jeremy & Topalova, Petia & Townsend, Robert & Vickery, James, 2010. "Barriers to household risk management : evidence from India," Policy Research Working Paper Series 5504, The World Bank.
- Petia Topalova & Shawn Cole & Xavier Gene & Jeremy Tobacman & Robert Townsend & James Vickery, 2011. "Barriers to Household Risk Management: Evidence from India," Working Papers id:4293, eSocialSciences.
- Shawn Cole & Xavier Giné & Jeremy Tobacman & Petia Topalova & Robert Townsend & James Vickery, 2009. "Barriers to household risk management: evidence from India," Staff Reports 373, Federal Reserve Bank of New York.
- Sam Schulhofer-Wohl, 2011.
"Heterogeneity and Tests of Risk Sharing,"
Journal of Political Economy,
University of Chicago Press, vol. 119(5), pages 925 - 958.
- Mehra, Rajnish & Prescott, Edward C., 1985.
"The equity premium: A puzzle,"
Journal of Monetary Economics,
Elsevier, vol. 15(2), pages 145-161, March.
- Guiso, Luigi & Paiella, Monica, 2001.
"Risk Aversion, Wealth and Background Risk,"
CEPR Discussion Papers
2728, C.E.P.R. Discussion Papers.
- Monica Paiella & Luigi Guiso, 2004. "Risk Aversion, Wealth and Background Risk," 2004 Meeting Papers 525, Society for Economic Dynamics.
- Luigi Guiso & Monica Paiella, 2007. "Risk Aversion, Wealth, and Background Risk," Economics Working Papers ECO2007/47, European University Institute.
- Luigi Guiso & Monica Paiella, 2003. "Risk Aversion, Wealth and Background Risk," Temi di discussione (Economic working papers) 483, Bank of Italy, Economic Research and International Relations Area.
- Pierre-Andre Chiappori & Krislert Samphantharak & Sam Schulhofer-Wohl & Robert Townsend, 2013. "Portfolio choices and risk preferences in village economies," Working Papers 706, Federal Reserve Bank of Minneapolis.
- GlennW. Harrison & StevenJ. Humphrey & Arjan Verschoor, 2010. "Choice under Uncertainty: Evidence from Ethiopia, India and Uganda," Economic Journal, Royal Economic Society, vol. 120(543), pages 80-104, 03.
- Chirok Han & Peter C. B. Phillips, 2006.
"GMM with Many Moment Conditions,"
Econometric Society, vol. 74(1), pages 147-192, 01.
- Peter C. B. Phillips & Chirok Han, 2004. "GMM with Many Moment Conditions," Econometric Society 2004 Far Eastern Meetings 525, Econometric Society.
- Chirok Han & Peter C.B. Phillips, 2005. "GMM with Many Moment Conditions," Cowles Foundation Discussion Papers 1515, Cowles Foundation for Research in Economics, Yale University.
- Jiang, Wang, 1996. "The term structure of interest rates in a pure exchange economy with heterogeneous investors," Journal of Financial Economics, Elsevier, vol. 41(1), pages 75-110, May.
- Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-56, October.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Alexander Karaivanov & Robert M. Townsend, 2013.
"Dynamic Financial Constraints: Distinguishing Mechanism Design from Exogenously Incomplete Regimes,"
NBER Working Papers
19617, National Bureau of Economic Research, Inc.
- Alexander Karaivanov & Robert M. Townsend, 2014. "Dynamic Financial Constraints: Distinguishing Mechanism Design From Exogenously Incomplete Regimes," Econometrica, Econometric Society, vol. 82(3), pages 887-959, 05.
- Sam Schulhofer-Wohl, 2008.
"Heterogeneous Risk Preferences and the Welfare Cost of Business Cycles,"
1045, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
- Sam Schulhofer-Wohl, 2008. "Heterogeneous Risk Preferences and the Welfare Cost of Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 761-780, October.
- Pierre-André Chiappori & Monica Paiella, 2008.
"Relative Risk Aversion Is Constant: Evidence from Panel Data,"
5_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Pierre‐André Chiappori & Monica Paiella, 2011. "Relative Risk Aversion Is Constant: Evidence From Panel Data," Journal of the European Economic Association, European Economic Association, vol. 9(6), pages 1021-1052, December.
- Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
When requesting a correction, please mention this item's handle: RePEc:wly:quante:v:5:y:2014:i::p:1-27. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.