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Consumption Risk-Sharing in Social Networks.
- Source :
- American Economic Review; Jan2014, Vol. 104 Issue 1, p149-182, 34p, 4 Diagrams, 1 Chart, 4 Graphs
- Publication Year :
- 2014
-
Abstract
- We develop a model in which connections between individuals serve as social collateral to enforce informal insurance payments. We show that: (i) The degree of insurance is governed by the expansiveness of the network, measured with the per capita number of connections that groups have with the rest of the community. 'Two-dimensional' networks-like real-world networks in Peruvian villages-are sufficiently expansive to allow very good risk-sharing. (ii) In second-best arrangements, insurance is local: agents fully share shocks within, but imperfectly between endogenously emerging risk-sharing groups. We also discuss how endogenous social collateral affects our results. (JEL D85, G22, O15, O17, Z13) [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 00028282
- Volume :
- 104
- Issue :
- 1
- Database :
- Complementary Index
- Journal :
- American Economic Review
- Publication Type :
- Academic Journal
- Accession number :
- 93350016
- Full Text :
- https://doi.org/10.1257/aer.104.1.149