Social Network Structure and Risk Sharing in Villages

Jiang Bin, Kim Jun Sung, Li Chuhui and Yang Ou ()
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Jiang Bin: Econometrics and Business Statistics, Monash University, 20 Chancellors WalkClayton VIC 3800, Australia
Kim Jun Sung: Econometrics and Business Statistics, Monash University, 20 Chancellors WalkClayton VIC 3800, Australia
Li Chuhui: Econometrics and Business Statistics, Monash University, 20 Chancellors WalkClayton VIC 3800, Australia
Yang Ou: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, 111 Barry StreetCarlton VIC 3053, Australia

The B.E. Journal of Economic Analysis & Policy, 2018, vol. 18, issue 3, 8

Abstract: This paper studies how the structure of friendship networks affects risk sharing in villages. Using techniques for partially identified econometric models, we construct a sharp bound on the true risk-sharing rate, which takes into account nomination errors in survey responses, and implement interval estimation. We show that the diameter of a network has a negative and significant impact on risk sharing. Our result implies that policymakers can effectively improve risk sharing between households by adopting policies that increase the network connectivity of individuals in the periphery of the social network.

Keywords: risk sharing; social networks; diameter; nomination errors (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1515/bejeap-2017-0263

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