Altruism and Risk Sharing in Networks

Renaud Bourlès (), Yann Bramoullé and Eduardo Perez

No 1838, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: We provide the first analysis of the risk-sharing implications of altruism networks. Agents are embedded in a fixed network and care about each other. We study whether altruistic transfers help smooth consumption and how this depends on the shape of the network. We identify two benchmarks where altruism networks generate efficient insurance: for any shock when the network of perfect altruism is strongly connected and for any small shock when the network of transfers is weakly connected. We show that the extent of informal insurance depends on the average path length of the altruism network and that small shocks are partially insured by endogenous risk-sharing communities. We uncover complex structural effects. Under iid incomes, central agents tend to be better insured, the consumption correlation between two agents is positive and tends to decrease with network distance, and a new link can decrease or increase the consumption variance of indirect neighbors. Overall, we show that altruism in networks has a first-order impact on risk and generates specific patterns of consumption smoothing.

Keywords: altruism; networks; risk sharing; Informal Insurance (search for similar items in EconPapers)
Pages: 30 pages
Date: 2018-11
New Economics Papers: this item is included in nep-gth, nep-ias and nep-ure
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Altruism and Risk Sharing in Networks (2021)
Working Paper: Altruism and Risk Sharing in Networks (2021)
Working Paper: Altruism and Risk Sharing in Networks (2021)
Working Paper: Altruism and Risk Sharing in Networks (2018)
Working Paper: Altruism and Risk Sharing in Networks (2018)
Working Paper: Altruism and Risk Sharing in Networks (2018)
Working Paper: Altruism and Risk Sharing in Networks (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:aim:wpaimx:1838

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