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Household Financial Access and Risk Sharing in Nigeria

Author

Listed:
  • Stacy Carlson
  • Era Dabla-Norris
  • Mika Saito
  • Yu Shi

Abstract

We examine the role of household financial access in determining the extent of risksharing in Nigeria using household-level panel data. We estimate changes in the response of consumption to shocks for households with formal and informal access to finance and those without, both for the country as a whole and for different regions. Our findings suggest that households with financial access who experience an unexpected negative income shock see consumption fall by 15 percentage points less than those without access. This result is mainly driven by households with informal financial access, and by household savings rather than borrowing. Regional variation in risk sharing tends to be significant, suggesting that financial inclusion efforts going forward should have a more regional focus.

Suggested Citation

  • Stacy Carlson & Era Dabla-Norris & Mika Saito & Yu Shi, 2015. "Household Financial Access and Risk Sharing in Nigeria," IMF Working Papers 15/169, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:15/169
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    References listed on IDEAS

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    1. Pierre‐André Chiappori & Krislert Samphantharak & Sam Schulhofer‐Wohl & Robert M. Townsend, 2014. "Heterogeneity and risk sharing in village economies," Quantitative Economics, Econometric Society, vol. 5, pages 1-27, March.
    2. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    3. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
    4. William Jack & Tavneet Suri, 2014. "Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution," American Economic Review, American Economic Association, vol. 104(1), pages 183-223, January.
    5. Alem, Mauro & Townsend, Robert M., 2014. "An evaluation of financial institutions: Impact on consumption and investment using panel data and the theory of risk-bearing," Journal of Econometrics, Elsevier, vol. 183(1), pages 91-103.
    6. Paul Gertler & David I. Levine & Enrico Moretti, 2006. "Is Social Capital the Capital of the Poor? The Role of Family and Community in Helping Insure Living Standards against Health Shocks," CESifo Economic Studies, CESifo, vol. 52(3), pages 455-499, September.
    7. Robert M. Townsend, 1995. "Financial Systems in Northern Thai Villages," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1011-1046.
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