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Risk Pooling, Risk preferences, and Social Networks

  • Orazio Attansio
  • Abigail Barr
  • Juan Camilo Cardenas
  • Garance Genicot
  • Costas Mehgir

Using date 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 assortativley with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals.

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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 2009-20.

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Date of creation: 2009
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Handle: RePEc:csa:wpaper:2009-20
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  18. Stefan Dercon & Tessa Bold, 2004. "Group-based Funeral Insurance in Ethiopia and Tanzania," Economics Series Working Papers WPS/2004-27, University of Oxford, Department of Economics.
  19. Besley, Timothy & Coate, Stephen, 1995. "Group lending, repayment incentives and social collateral," Journal of Development Economics, Elsevier, vol. 46(1), pages 1-18, February.
  20. Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
  21. 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.
  22. 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.
  23. Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
  24. Chowdhury, Prabal Roy, 2007. "Group-lending with sequential financing, contingent renewal and social capital," Journal of Development Economics, Elsevier, vol. 84(1), pages 487-506, September.
  25. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
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