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Self-Production, Friction, and Risk Sharing against Disasters: Evidence from a developing country

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  • SAWADA Yasuyuki
  • NAKATA Hiroyuki
  • KOTERA Tomoaki

Abstract

This paper uses a unique household data set collected in Vietnam to empirically test the necessary conditions for an extended version of the consumption risk-sharing hypothesis. The test explicitly incorporates self-production and uses natural disasters such as avian influenza, droughts, and floods to identify the effectiveness of market and non-market risk-sharing mechanisms. With these additional treatments, full risk sharing cannot be rejected, which suggests the presence of omitted variable bias in existing studies that reject full risk sharing. We also find that credit constraints have a significant impact, although limited commitment is not necessarily serious.

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  • SAWADA Yasuyuki & NAKATA Hiroyuki & KOTERA Tomoaki, 2011. "Self-Production, Friction, and Risk Sharing against Disasters: Evidence from a developing country," Discussion papers 11017, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:11017
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    References listed on IDEAS

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    1. repec:bla:asiapr:v:12:y:2017:i:1:p:18-40 is not listed on IDEAS
    2. SAWADA Yasuyuki & MASAKI Tatsujiro & NAKATA Hiroyuki & SEKIGUCHI Kunio, 2017. "Natural Disasters: Financial preparedness of corporate Japan," Discussion papers 17014, Research Institute of Economy, Trade and Industry (RIETI).
    3. Abigail Barr & Trudy Owens & Ashira Perera, 2017. "Risk taking and sharing when risk exposure is interdependent," Discussion Papers 2017-08, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.

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