Risk Sharing, Commitment Constraints and Self Help Groups

Orazio Attanasio, Anjini Kochar, Aprajit Mahajan and Vaishnavi Surendra

No 31245, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Evaluations of group savings and lending programs have largely focused on average impacts, rather than distributional impacts — finding modest effects on long-term economic well-being. In this paper, we exploit the randomized roll-out of a self-help group lending program in rural Bihar, India (Hoffmann et al., 2021) to demonstrate that well-functioning groups facilitate risk-sharing within rural communities. We find no impact of the program on risk-sharing, measured as a reduction in the variance of consumption growth, in the aggregate. However, the program significantly improves risk-sharing in regions where it had greater institutional capacity and was better implemented. Building on our theoretical framework, we provide evidence of a specific channel of impact: program quality and pre-existing scale improve the quality and functioning of groups, which in turn increase the insurance value of the program to communities.

JEL-codes: D14 G21 I38 O13 O16 (search for similar items in EconPapers)
Date: 2023-05
New Economics Papers: this item is included in nep-mfd
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