Altruism and Risk Sharing in Networks

Eduardo Perez, Bramoullé, Yann and Renaud Bourlès ()
Authors registered in the RePEc Author Service: Yann Bramoullé

No 13164, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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)
Date: 2018-09
New Economics Papers: this item is included in nep-gth, nep-ias, nep-net, nep-rmg, nep-soc and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP13164 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13164

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13164

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().