IDEAS home Printed from https://ideas.repec.org/p/osf/socarx/bxt8g_v1.html
   My bibliography  Save this paper

Social capital and the evolution of risk management: Balancing risk-taking and risk-avoidance in cooperative networks

Author

Listed:
  • Hwang, Joon
  • Alam, Nurul
  • Shenk, Mary K

    (The Pennsylvania State University)

Abstract

Throughout human evolutionary history, individuals have faced two fundamental challenges under uncertainty: deciding whether to take risks and managing risks through cooperation. While both risk-taking and social risk management have been widely studied, less attention has been given to how these two processes are linked—specifically, how risk-taking itself may be shaped by social networks. We test the "social capital buffer" hypothesis, which posits that greater social connectedness promotes risk-taking by buffering against negative outcomes. Analyzing social networks and risk preferences among 140 individuals in rural Bangladesh whose livelihoods range from farming to wage labor and small-scale trade, we identify distinct pathways through which social capital influences risk preference. Highly clustered individuals in financial support networks exhibit greater risk preference, suggesting that clustering facilitates risk-taking by ensuring resource circulation within a tight-knit group. In contrast, individuals with more support-receiving ties in material support networks are more risk-averse, indicating that material support functions as informal social insurance reducing reliance on risky decisions. Finally, reciprocity in material support networks promotes risk-taking only among wealthier individuals, highlighting how individual economic resources interact with social capital to shape risk-taking. These findings reveal that social capital does not uniformly promote or constrain risk-taking but serves distinct adaptive functions based on network structure, economic conditions, and resource types, balancing risk-taking and risk-avoidance to help individuals successfully navigate uncertainty.

Suggested Citation

  • Hwang, Joon & Alam, Nurul & Shenk, Mary K, 2025. "Social capital and the evolution of risk management: Balancing risk-taking and risk-avoidance in cooperative networks," SocArXiv bxt8g_v1, Center for Open Science.
  • Handle: RePEc:osf:socarx:bxt8g_v1
    DOI: 10.31219/osf.io/bxt8g_v1
    as

    Download full text from publisher

    File URL: https://osf.io/download/68d6b97307e380a2a1432b23/
    Download Restriction: no

    File URL: https://libkey.io/10.31219/osf.io/bxt8g_v1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2007. "Estimating Risk Attitudes in Denmark: A Field Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 341-368, June.
    2. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    3. Kovářík Jaromír & van der Leij Marco J., 2014. "Risk Aversion and Social Networks," Review of Network Economics, De Gruyter, vol. 13(2), pages 121-155.
    4. Mace, Ruth, 1990. "Pastoralist herd compositions in unpredictable environments: A comparison of model predictions and data from camel-keeping groups," Agricultural Systems, Elsevier, vol. 33(1), pages 1-11.
    5. Tesfamicheal Wossen & Thomas Berger & Salvatore Di Falco, 2015. "Social capital, risk preference and adoption of improved farm land management practices in Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 46(1), pages 81-97, January.
    6. Alvarado, E. & Ibanez, M. & Brummer, B., 2018. "Understanding how risk preferences and social capital affect farmers’ behavior to anticipatory and reactive adaptation options to climate change: the case of vineyard farmers in central Chile," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275978, International Association of Agricultural Economists.
    7. Cardenas, Juan-Camilo, 2003. "Real wealth and experimental cooperation: experiments in the field lab," Journal of Development Economics, Elsevier, vol. 70(2), pages 263-289, April.
    8. Curtis Atkisson & Piotr J. G'orski & Matthew O. Jackson & Janusz A. Ho{l}yst & Raissa M. D'Souza, 2019. "Why understanding multiplex social network structuring processes will help us better understand the evolution of human behavior," Papers 1903.11183, arXiv.org, revised May 2020.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oo, Alex & Toth, Russell, 2014. "Do community-sanctioned social pressures constrain microenterprise growth? Evidence from a framed field experiment," Journal of the Japanese and International Economies, Elsevier, vol. 33(C), pages 75-95.
    2. de Melo, Gioia & Piaggio, Matías, 2015. "The perils of peer punishment: Evidence from a common pool resource framed field experiment," Ecological Economics, Elsevier, vol. 120(C), pages 376-393.
    3. Matteo M. Galizzi & Daniel Navarro-Martinez, 2019. "On the External Validity of Social Preference Games: A Systematic Lab-Field Study," Management Science, INFORMS, vol. 65(3), pages 976-1002, March.
    4. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2016. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Affect Risk Preference Outcomes? Evidence from Rural Uganda," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    5. Tesfamicheal Wossen & Salvatore Falco & Thomas Berger & William McClain, 2016. "You are not alone: social capital and risk exposure in rural Ethiopia," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(4), pages 799-813, August.
    6. Ginger Zhe Jin & Andrew Kato & John A. List, 2010. "That’S News To Me! Information Revelation In Professional Certification Markets," Economic Inquiry, Western Economic Association International, vol. 48(1), pages 104-122, January.
    7. Jinhua Xie & Gangqiao Yang & Ge Wang & Shuoyan He, 2024. "How does social capital affect farmers’ environment-friendly technology adoption behavior? A case study in Hubei Province, China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(7), pages 18361-18384, July.
    8. Falk Armin & Kosfeld Michael, 2012. "It's all about Connections: Evidence on Network Formation," Review of Network Economics, De Gruyter, vol. 11(3), pages 1-36, September.
    9. Mahmud, Mahreen & Riley, Emma, 2021. "Household response to an extreme shock: Evidence on the immediate impact of the Covid-19 lockdown on economic outcomes and well-being in rural Uganda," World Development, Elsevier, vol. 140(C).
    10. repec:rza:wpaper:227 is not listed on IDEAS
    11. Isaac Baidoo & Mawumefa Akusika Diaba & Amy Eshun Atiwoto & Kingsley Odum Sam, 2024. "Economic Valuation of Three Selected Market Centers in Accra, Ghana," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(3), pages 2590-2602, March.
    12. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Aaron K. Chatterji & Michael Findley & Nathan M. Jensen & Stephan Meier & Daniel Nielson, 2016. "Field experiments in strategy research," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 116-132, January.
    13. Choi, Eleanor Jawon & Choi, Jaewoo & Son, Hyelim, 2020. "The long-term effects of labor market entry in a recession: Evidence from the Asian financial crisis," Labour Economics, Elsevier, vol. 67(C).
    14. Corno, Lucia & Voena, Alessandra, 2023. "Child marriage as informal insurance: Empirical evidence and policy simulations," Journal of Development Economics, Elsevier, vol. 162(C).
    15. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    16. Fossen, Frank M. & Glocker, Daniela, 2017. "Stated and revealed heterogeneous risk preferences in educational choice," European Economic Review, Elsevier, vol. 97(C), pages 1-25.
    17. Klaus Deininger & Denys Nizalov & Sudhir K Singh, 2013. "Are mega-farms the future of global agriculture? Exploring the farm size-productivity relationship for large commercial farms in Ukraine," Discussion Papers 49, Kyiv School of Economics.
    18. Lex Borghans & Angela Lee Duckworth & James J. Heckman & Bas ter Weel, 2008. "The Economics and Psychology of Personality Traits," Journal of Human Resources, University of Wisconsin Press, vol. 43(4).
    19. Kislat, Carmen & Menkhoff, Lukas & Neuberger, Doris, 2013. "The use of collateral in formal and informal lending," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79765, Verein für Socialpolitik / German Economic Association.
    20. Guido Friebel & Matthias Heinz & Miriam Krueger & Nikolay Zubanov, 2017. "Team Incentives and Performance: Evidence from a Retail Chain," American Economic Review, American Economic Association, vol. 107(8), pages 2168-2203, August.
    21. Renate Strobl & Conny Wunsch, 2021. "Risky choices and solidarity: disentangling different behavioural channels," Experimental Economics, Springer;Economic Science Association, vol. 24(4), pages 1185-1214, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:osf:socarx:bxt8g_v1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: OSF (email available below). General contact details of provider: https://arabixiv.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.