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Spatial vs. Social Network Effects in Risk Sharing

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  • Aida, Takeshi

Abstract

Although substantial research has been conducted on informal consumption smoothing mechanisms within villages, or within social clusters such as family and friends, few studies have compared the effects of these spatial and social networks. Employing spatial panel econometric models, this study extends the conventional empirical test of the full risk-sharing hypothesis to incorporate spatial and social network effects, and quantifies the diffusion of income shocks in each network. Estimation results based on household survey data in Southern Sri Lanka show that consumption smoothing performs better in spatial networks than in social ones, because income shocks defuse more effectively among neighboring households. This study also shows the limitations of the conventional test when it is considered a special case of a spatial econometric model.

Suggested Citation

  • Aida, Takeshi, 2015. "Spatial vs. Social Network Effects in Risk Sharing," Working Papers 89, JICA Research Institute.
  • Handle: RePEc:jic:wpaper:89
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    Cited by:

    1. Quynh Hoang & Laure Pasquier-Doumer & Camille Saint-Macary, 2018. "Ethnicity and risk sharing network formation: Evidence from rural Vietnam," WIDER Working Paper Series 134, World Institute for Development Economic Research (UNU-WIDER).
    2. Joongsan Ko, 2020. "Intranational Consumption Risk Sharing in South Korea: 2000–2016," Asian Economic Journal, East Asian Economic Association, vol. 34(1), pages 29-49, March.
    3. Hoang & Laure Pasquier-Doumer & Camille Saint-Macary, 2018. "Ethnicity and risk sharing network formation: Evidence from rural Viet Nam," Working Papers DT/2018/15, DIAL (Développement, Institutions et Mondialisation).
    4. Quynh Hoang & Laure Pasquier-Doumer & Camille Saint-Macary, 2018. "Ethnicity and risk sharing network formation: Evidence from rural Vietnam," WIDER Working Paper Series wp-2018-134, World Institute for Development Economic Research (UNU-WIDER).
    5. Quynh Hoang & Camille Saint Macary & Laure Pasquier-Doumer, 2021. "Ethnicity and risk sharing network formation: Evidence from rural Viet Nam," Working Papers hal-03361332, HAL.

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    Keywords

    risk sharing ; network ; kinship ; spillover effect;
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