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The impact of social capital on consumption insurance and income volatility in U.K.: evidence from british household panel survey

Author

Listed:
  • Pericoli, Filippo M.
  • Pierucci, Eleonora
  • Ventura, Luigi

Abstract

On BHPS data we measure various indices of social capital at the individual and household level, and use them as explanatory variables in standard consumption insurance tests. We find that two out of three aspects of social capital positively impact on consumption smoothing, by reducing the sensitivity of idiosyncratic consumption to idiosyncratic income, both in the long and in the short run. Such effects, however, turn out to be more pronounced in the long run. Further confirmation of the positive impact of social capital on insurance opportunities are derived from an income smoothing exercise, as well as from a Poisson and a Logit analysis on the occurrence of unemployment spells.

Suggested Citation

  • Pericoli, Filippo M. & Pierucci, Eleonora & Ventura, Luigi, 2012. "The impact of social capital on consumption insurance and income volatility in U.K.: evidence from british household panel survey," MPRA Paper 44214, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:44214
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    File URL: https://mpra.ub.uni-muenchen.de/44214/1/MPRA_paper_44214.pdf
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    References listed on IDEAS

    as
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    3. Feigenberg, Benjamin & Field, Erica M. & Pande, Rohini, 2010. "Building Social Capital through Microfinance," Working Paper Series rwp10-019, Harvard University, John F. Kennedy School of Government.
    4. Eleonora Pierucci & Luigi Ventura, 2010. "Risk Sharing: A Long Run Issue?," Open Economies Review, Springer, vol. 21(5), pages 705-730, November.
    5. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    6. Michael J. Artis & Mathias Hoffmann, 2011. "The Home Bias, Capital Income Flows and Improved Long-Term Consumption Risk Sharing between Industrialized Countries," International Finance, Wiley Blackwell, vol. 14(3), pages 481-505, December.
    7. Balli, Faruk & Basher, Syed Abul & Balli, Hatice Ozer, 2011. "Income insurance and the determinants of income insurance via foreign asset revenues and foreign liability payments," Economic Modelling, Elsevier, vol. 28(5), pages 2296-2306, September.
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    Cited by:

    1. Faruk Balli & F.M. Pericoli & E. Pierucci, 2015. "Channels of risk-sharing at a micro level: savings, investments and the risk aversion heterogeneity," CAMA Working Papers 2015-01, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.

    More about this item

    Keywords

    consumption insurance; social capital; income volatility; item response theory;

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • A14 - General Economics and Teaching - - General Economics - - - Sociology of Economics

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