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The Formation of Risk Sharing Networks

  • Gubert, Flore
  • Fafchamps, Marcel

This paper examines the formation of risk sharing networks in the rural Philippines. We find that geographic proximity–possibly correlated with kinship–is a major determinant of mutual insurance links among villagers. Age and wealth differences also play an important role. In contrast, income correlation and differences in occupation are not determinants of network links. Reported network links have a strong effect on subsequent gifts and loans. Gifts between network partners are found to respond to shocks and to differences in health status. From this we conclude that intra-village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income risk. The paper also makes a methodological contribution to the estimation of dyadic models.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/4392/1/2005-13.pdf
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4392.

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Date of creation: Jul 2007
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Publication status: Published in Journal of Development Economics, 2007, Vol. 83, no. 2. pp. 326-350.Length: 24 pages
Handle: RePEc:dau:papers:123456789/4392
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  1. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
  2. Oriana Bandiera & Imran Rasul, 2006. "Social Networks and Technology Adoption in Northern Mozambique," Economic Journal, Royal Economic Society, vol. 116(514), pages 869-902, October.
  3. Rosenzweig, Mark R. & Wolpin, Kenneth I., 1988. "Migration selectivity and the effects of public programs," Journal of Public Economics, Elsevier, vol. 37(3), pages 265-289, December.
  4. Rosenzweig, Mark R. & Stark, Oded, 1987. "Consumption Smoothing, Migration and Marriage: Evidence from Rural India," Bulletins 7515, University of Minnesota, Economic Development Center.
  5. 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).
  6. Mogues, Tewodaj & Carter, Michael R., 2004. "Social Capital And The Reproduction Of Inequality In Socially Polarized Economies," 2004 Annual meeting, August 1-4, Denver, CO 20132, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-18, October.
  8. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, vol. 18(1), pages 221-277, April.
  9. 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.
  10. 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.
  11. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  12. Stefan Dercon & Joachim De Weerdt, 2002. "Risk-sharing networks and insurance against illness," CSAE Working Paper Series 2002-16, Centre for the Study of African Economies, University of Oxford.
  13. Marcel Fafchamps & Flore Gubert, 2004. "Contingent Loan Repayment in the Philippines," Economics Series Working Papers 215, University of Oxford, Department of Economics.
  14. Quisumbing, Agnes R., 1994. "Intergenerational transfers in Philippine rice villages : Gender differences in traditional inheritance customs," Journal of Development Economics, Elsevier, vol. 43(2), pages 167-195, April.
  15. Pramila Krishnan & Stefan Dercon, 1997. "In sickness and in health ... risk-sharing within households in rural Ethiopia," CSAE Working Paper Series 1997-12, Centre for the Study of African Economies, University of Oxford.
  16. Basu, Kaushik, 1986. "One Kind of Power," Oxford Economic Papers, Oxford University Press, vol. 38(2), pages 259-82, July.
  17. Sanjeev Goyal & Marco van der Leij & José Luis Moraga Gonzales, 2004. "Economics: An Emerging Small World?," CESifo Working Paper Series 1287, CESifo Group Munich.
  18. Marcle Fafchamps, 1999. "Risk sharing and quasi-credit," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(3), pages 257-278.
  19. Timothy Conley & Udry Christopher, 2001. "Social Learning Through Networks: The Adoption of New Agricultural Technologies in Ghana," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(3), pages 668-673.
  20. Marcel Fafchamps, 2006. "Development and social capital," Journal of Development Studies, Taylor & Francis Journals, vol. 42(7), pages 1180-1198.
  21. repec:dgr:uvatin:20040001 is not listed on IDEAS
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  23. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
  24. Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, August.
  25. Mattia Romani, 2003. "Love Thy Neighbour? Evidence from Ethnic Discrimination in Information Sharing within Villages in C�te d'Ivoire," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 12(4), pages 533-563, December.
  26. Andrew D. Foster & Mark R. Rosenzweig, 2001. "Imperfect Commitment, Altruism, And The Family: Evidence From Transfer Behavior In Low-Income Rural Areas," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 389-407, August.
  27. Binswanger, Hans P & McIntire, John, 1987. "Behavioral and Material Determinants of Production Relations in Land-Abundant Tropical Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 36(1), pages 73-99, October.
  28. Elizabeth Frankenberg & James P. Smith & Duncan Thomas, 2003. "Economic Shocks, Wealth, and Welfare," Journal of Human Resources, University of Wisconsin Press, vol. 38(2).
  29. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 1998. "Mutual Insurance, Individual Savings and Limited Commitment," Keele Department of Economics Discussion Papers (1995-2001) 98/14, Department of Economics, Keele University.
  30. Smith, Richard J & Blundell, Richard W, 1986. "An Exogeneity Test for a Simultaneous Equation Tobit Model with an Application to Labor Supply," Econometrica, Econometric Society, vol. 54(3), pages 679-85, May.
  31. Glewwe, Paul & Hall, Gillette, 1998. "Are some groups more vulnerable to macroeconomic shocks than others? Hypothesis tests based on panel data from Peru," Journal of Development Economics, Elsevier, vol. 56(1), pages 181-206, June.
  32. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Wiley Blackwell, vol. 70(1), pages 87-113, January.
  33. Marcel Fafchamps & Marco J. van der Leij, 2006. "Scientific Networks and Co-authorship," Economics Series Working Papers 256, University of Oxford, Department of Economics.
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