IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Risk and Reciprocity Over the Mobile Phone Network: Evidence from Rwanda

  • Joshua Blumenstock
  • Nathan Eagle
  • Marcel Fafchamps

A large literature describes how local risk sharing networks can help individuals smooth consumption in the face of idiosyncratic economic shocks. However, when an entire community faces a large covariate shock, and when the transaction costs of transfers are high, these risk sharing networks are likely to be less effective. In this paper, we document how a new technology – mobile phones – reduces transaction costs and enables Rwandans to share risk quickly over long distances. We examine a comprehensive database of person-to-person transfers of mobile airtime and find that individuals send this rudimentary form of “mobile money” to friends and family affected by natural disasters. Using the Lake Kivu earthquake of 2008 to identify the effect of a large covariate shock on interpersonal transfers, we estimate that a current-day earthquake would result in the transfer of between $22,000 and $30,000 to individuals living near the epicenter. We further show that the pattern of transfers is most consistent with a model of reciprocal risk sharing, where transfers are determined by past reciprocity and geographical proximity, rather than one of pure charity or altruism, in which transfers would be expected to be increasing in the wealth of the sender and decreasing in the wealth of the recipient.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/csae-wps-2011-19.pdf
Download Restriction: no

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2011-19.

as
in new window

Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:csa:wpaper:2011-19
Contact details of provider: Postal: Manor Road, Oxford, OX1 3UQ
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Web page: http://www.csae.ox.ac.uk/
Email:


More information through EDIRC

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.:

as in new window
  1. Rosenzweig, Mark R., 1986. "Risk, Implicit Contracts and the Family in Rural Areas of Low-Income Countries," Bulletins 7518, University of Minnesota, Economic Development Center.
  2. Dreze, Jean & Sen, Amartya, 1991. "Hunger and Public Action," OUP Catalogue, Oxford University Press, number 9780198283652, March.
  3. John A. List & David Lucking-Reiley, 2000. "The Effects of Seed Money and Refunds on Charitable Giving: Experimental Evidence from a University Capital Campaign," Vanderbilt University Department of Economics Working Papers 0008, Vanderbilt University Department of Economics.
  4. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
  5. Charness, Gary B & Rabin, Matthew, 2001. "Understanding Social Preferences With Simple Tests," University of California at Santa Barbara, Economics Working Paper Series qt0dc3k4m5, Department of Economics, UC Santa Barbara.
  6. Matthew Jowett, 2003. "Do informal risk sharing networks crowd out public voluntary health insurance? Evidence from Vietnam," Applied Economics, Taylor & Francis Journals, vol. 35(10), pages 1153-1161.
  7. Narayana Kocherlakota, 2010. "Implications of Efficient Risk Sharing Without Commitment," Levine's Working Paper Archive 2053, David K. Levine.
  8. Roubaud, François & Gubert, Flore & de Vreyer, Philippe, 2009. "Migration, self selection and returns to education in the WAEMU," Economics Papers from University Paris Dauphine 123456789/627, Paris Dauphine University.
  9. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  10. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  11. Jean Tirole & Roland Bénabou, 2006. "Incentives and Prosocial Behavior," American Economic Review, American Economic Association, vol. 96(5), pages 1652-1678, December.
  12. Takashi Kurosaki & Marcel Fafchamps, 1997. "Insurance Market Efficiency and Crop Choices in Pakistan," Working Papers 97010, Stanford University, Department of Economics.
  13. Gubert, Flore & Fafchamps, Marcel, 2007. "The Formation of Risk Sharing Networks," Economics Papers from University Paris Dauphine 123456789/4392, Paris Dauphine University.
  14. Quoc-Anh Do & Stephen Leider & Markus M. Mobius & Tanya Rosenblat, 2008. "Directed Altruism and Enforced Reciprocity in Social Networks," Working Papers 17-2008, Singapore Management University, School of Economics.
  15. Ligon, Ethan, 1998. "Risk Sharing and Information in Village Economics," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 847-64, October.
  16. Marcle Fafchamps, 1999. "Risk sharing and quasi-credit," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(3), pages 257-278.
  17. Sen, Amartya, 1983. "Poverty and Famines: An Essay on Entitlement and Deprivation," OUP Catalogue, Oxford University Press, number 9780198284635, March.
  18. Arun G. Chandrasekhar & Cynthia Kinnan & Horacio Larreguy, 2014. "Social Networks as Contract Enforcement: Evidence from a Lab Experiment in the Field," NBER Working Papers 20259, National Bureau of Economic Research, Inc.
  19. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 209-44, January.
  20. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
  21. De Weerdt, Joachim, 2002. "Risk-Sharing and Endogenous Network Formation," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  22. Platteau, Jean-Philippe, 1995. "An Indian Model of Aristocratic Patronage," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 636-62, October.
  23. Étienne Gilbert, 1983. "A. Sen, Poverty and Famines, an essay on Entitlement and Deprivation," Revue Tiers Monde, Programme National Persée, vol. 24(93), pages 211-211.
  24. 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.
  25. Marcel Fafchamps & Flore Gubert, 2005. "The Formation of Risk Sharing Networks," Economics Series Working Papers GPRG-WPS-037, University of Oxford, Department of Economics.
  26. Joachim De Weerdt & Marcel Fafchamps, 2011. "Social Identity and the Formation of Health Insurance Networks," Journal of Development Studies, Taylor & Francis Journals, vol. 47(8), pages 1152-1177, June.
  27. Marcel Fafchamps & Takashi Kurosaki, 2000. "Insurance Market Efficiency and Crop Choices in Pakistan," Economics Series Working Papers 12, University of Oxford, Department of Economics.
  28. Brett-Crowther, M. R., 1983. "Poverty and famines an essay on entitlement and deprivation : Amartya Sen Clarendon Press/Oxford University Press, Oxford, UK, 1981, 257 pp. [UK pound]8.95," Food Policy, Elsevier, vol. 8(1), pages 94-95, February.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2011-19. 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: (Richard Payne)

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.