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

Listed author(s):
  • SAWADA Yasuyuki
  • NAKATA Hiroyuki
  • KOTERA Tomoaki

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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File URL: http://www.rieti.go.jp/jp/publications/dp/11e017.pdf
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Paper provided by Research Institute of Economy, Trade and Industry (RIETI) in its series Discussion papers with number 11017.

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Length: 33 pages
Date of creation: Mar 2011
Handle: RePEc:eti:dpaper:11017
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