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- Title
Consumption Risk-Sharing in Social Networks.
- Authors
Ambrus, Attila; Mobius, Markus; Szeidl, Adam
- 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)
- Subjects
HUARAZ (Peru); SOCIAL networks; RISK sharing; CONSUMPTION (Economics); ENDOGENEITY (Econometrics); INFORMAL sector
- Publication
American Economic Review, 2014, Vol 104, Issue 1, p149
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.104.1.149