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Risk Pooling, Risk Preferences, and Social Networks

  • Abigail Barr
  • Orazio Attanasio

Using data from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced.� We explore the roles played by risk attitudes and network connections both theoretically and empirically.� We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes.� Also, consistent with our theoretical finding that when there is a problem of trust the process of pooling assortatively with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals.

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File URL: http://www.csae.ox.ac.uk/workingpapers/pdfs/2009-20text.pdf
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Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2009-20.

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Date of creation: 01 Nov 2009
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Handle: RePEc:oxf:wpaper:csae-wps/2009-20
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  9. Abigail Barr & Marleen Dekker & Marcel Fafchamps, 2012. "Who Shares Risk with Whom under Different Enforcement Mechanisms?," Economic Development and Cultural Change, University of Chicago Press, vol. 60(4), pages 677 - 706.
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  11. Dercon, Stefan & De Weerdt, Joachim & Bold, Tessa & Pankhurst, Alula, 2006. "Group-based funeral insurance in Ethiopia and Tanzania," World Development, Elsevier, vol. 34(4), pages 685-703, April.
  12. Loic Sadoulet, 2000. "Equilibrium Risk-Matching in Group Lending," Econometric Society World Congress 2000 Contributed Papers 1302, Econometric Society.
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  16. Gabrielle Demange, 2005. "Group formation: The interaction of increasing returns and preferences' diversity," Post-Print halshs-00573563, HAL.
  17. Prabal Roy Chowdhury, 2006. "Group-lending with sequential financing, contingent renewal and social capital," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 06-01, Indian Statistical Institute, New Delhi, India.
  18. Seth Carpenter & Loic Sadoulet, 2000. "Risk-Matching in Credit Groups: Evidence from Guatemala," Econometric Society World Congress 2000 Contributed Papers 1310, Econometric Society.
  19. Ghatak, Maitreesh, 2000. "Screening by the Company You Keep: Joint Liability Lending and the Peer Selection Effect," Economic Journal, Royal Economic Society, vol. 110(465), pages 601-31, July.
  20. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
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  23. de Janvry, Alain & Sadoulet, Elisabeth & Winters, Paul C. & Murgai, Rinku, 2000. "Localized and Incomplete Mutual Insurance," Working Papers 12905, University of New England, School of Economics.
  24. S. Narayan, 2009. "India," Chapters, in: The Political Economy of Trade Reform in Emerging Markets, chapter 7 Edward Elgar.
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