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Risk Pooling, Risk Preferences, and Social Networks

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Abstract

Using data from an experiment conducted in 70 Colombian communities, we investigate who pools risk with whom when trust is crucial to enforce risk pooling arrangements. We explore the roles played by risk attitudes and social networks. Both theoretically and empirically, we find that close friends and relatives group assortatively on risk attitudes and are more likely to join the same risk pooling group, while unfamiliar participants group less and rarely assort. These findings indicate that where there are advantages to grouping assortatively on risk attitudes those advantages may be inaccessible when trust is absent or low.

Suggested Citation

  • Garance Genicot, Orazio Attanasio, Abigail Barr, Juan Camilo Cardenas and Costas Meghir, 2011. "Risk Pooling, Risk Preferences, and Social Networks," Working Papers gueconwpa~11-11-05, Georgetown University, Department of Economics.
  • Handle: RePEc:geo:guwopa:gueconwpa~11-11-05
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    More about this item

    Keywords

    Field experiment; risk sharing; social sanctions; insurance; group formation; matching.;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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