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Natural disasters and informal risk sharing against illness: networks vs. groups

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  • Yoshito Takasaki

Abstract

Using original household panel survey data collected in rural Fiji, this paper demonstrates how informal risk-sharing institutions upon which poor people heavily rely in times of illness are vulnerable to natural disasters. First, household private cash-inkind transfers do not serve as insurance against illness in the relief phase (several months after the disaster); they do so only after pooled resources are recovered in the reconstruction phase (a few years later) (i.e., the resource effect). Second, risk-sharing arrangements are dependent on the history of labor-time transfers corresponding to housing damage: Only disaster non-victims are insured against illness, because victims have already received labor help for their rehabilitation from non-victims (i.e., the reciprocity effect). The paper also reveals that resource/reciprocity effects exist in endogenously formed networks and pre-formed groups, as risk-sharing pools to a similar degree. Not only do private transfers exchanged among households serve as insurance, but also, household contributions directly made to groups ? such as ritual gifts and religious donations ? contain risk- sharing components against illness among group members. Although the former finding is commonly evident in the literature, the latter is new. Network formation is directly related to pre-formed groups, especially kin and religious ones.

Suggested Citation

  • Yoshito Takasaki, 2010. "Natural disasters and informal risk sharing against illness: networks vs. groups," Tsukuba Economics Working Papers 2010-006, Economics, Graduate School of Humanities and Social Sciences, University of Tsukuba.
  • Handle: RePEc:tsu:tewpjp:2010-006
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    1. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, pages 337-356.
    2. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, pages 337-356.
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