Assessing the Impact of Public Transfers on Private Risk Sharing Arrangements: Evidence from a Randomized Experiment in Mexico
We adopt a structural estimation approach to studying the effects of public transfers on consumption smoothing, risk sharing and welfare in small village economies. We estimate the key parameters of a dynamic limited commitment model using data gathered as part of the Mexican Progresa program, and take advantage of the randomized experimental design of the data to validate the model using the treatment sample. The limited commitment model enriched to allow for unobserved heterogeneity in preferences can reasonably well explain consumption dynamics and cross-sectional distributions. The estimated model correctly predicts the increase in consumption smoothing and risk sharing within transfers recipients, and the decrease in risk sharing between beneficiaries and non beneficiaries of the program.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/society.htm
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert M. Townsend, .
"Risk and Insurance in Village India,"
University of Chicago - Population Research Center
91-3a, Chicago - Population Research Center.
- Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
- Cagetti, Marco, 2003. "Wealth Accumulation over the Life Cycle and Precautionary Savings," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(3), pages 339-53, July.
- Albarran, Pedro & Attanasio, Orazio P., 2002. "Do Public Transfers Crowd Out Private Transfers? Evidence from a Randomized Experiment in Mexico," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Ogaki, Masao & Zhang, Qiang, 2001.
"Decreasing Relative Risk Aversion and Tests of Risk Sharing,"
Econometric Society, vol. 69(2), pages 515-26, March.
- Masao Ogaki & Qiang Zhang, 2000. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Econometric Society World Congress 2000 Contributed Papers 1588, Econometric Society.
- Masao Ogaki & Qiang Zhang, 1998. "Decreasing Relative Risk Aversion and Tests of Risk Sharing," Working Papers 98-02, Ohio State University, Department of Economics.
- Angelucci, Manuela & De Giorgi, Giacomo, 2006. "Indirect Effects of an Aid Program: The Case of Progresa and Consumption," IZA Discussion Papers 1955, Institute for the Study of Labor (IZA).
- Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
- Kenneth I. Wolpin & Petra E. Todd, 2006. "Assessing the Impact of a School Subsidy Program in Mexico: Using a Social Experiment to Validate a Dynamic Behavioral Model of Child Schooling and Fertility," American Economic Review, American Economic Association, vol. 96(5), pages 1384-1417, December.
- Donald Cox & Bruce E. Hansen & Emmanuel Jimenez, 1997.
"How Responsive are Private Transfers to Income? Evidence from a Laissez-Faire Economy,"
Boston College Working Papers in Economics
341., Boston College Department of Economics, revised 01 Dec 1999.
- Cox, Donald & Hansen, Bruce E. & Jimenez, Emmanuel, 2004. "How responsive are private transfers to income? Evidence from a laissez-faire economy," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2193-2219, August.
- 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.
- Maurizio Mazzocco & Shiv Saini, 2012. "Testing Efficient Risk Sharing with Heterogeneous Risk Preferences," American Economic Review, American Economic Association, vol. 102(1), pages 428-68, February.
- Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 1998.
"Mutual Insurance, Individual Savings and Limited Commitment,"
Keele Department of Economics Discussion Papers (1995-2001)
98/14, Department of Economics, Keele University.
- Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2000. "Mutual Insurance, Individual Savings and Limited Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 216-246, April.
- Skoufias, Emmanuel, 2007. "Poverty alleviation and consumption insurance: Evidence from PROGRESA in Mexico," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 36(4), pages 630-649, August.
- Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," Review of Economic Studies, Oxford University Press, vol. 73(1), pages 163-193.
- Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
- Pedro Albarran & Orazio P. Attanasio, 2003. "Limited Commitment and Crowding out of Private Transfers: Evidence from a Randomised Experiment," Economic Journal, Royal Economic Society, vol. 113(486), pages C77-C85, March.
When requesting a correction, please mention this item's handle: RePEc:red:sed008:743. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.