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Risk-sharing networks and insurance against illness

  • Stefan Dercon
  • Joachim De Weerdt

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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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2002-16.

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Date of creation: 2002
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Handle: RePEc:csa:wpaper:2002-16
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