The Formation of Risk Sharing Networks

Marcel Fafchamps and Flore Gubert

No DT/2005/13, Working Papers from DIAL (Développement, Institutions et Mondialisation)

Abstract: (English) This paper examines the endogenous formation of risk sharing networks in the rural Philippines. We show that geographic proximity is a major determinant of interpersonal relationships. We find little evidence that people form relationships to pool income risk. The existence of a pre-existing relationship between two individuals is a major determinant of subsequent gifts and informal loans between them, controlling for other proximity factors. From this we conclude that these transfers and informal loans are embedded in interpersonal relationships. These relationships are largely determined by proximity factors and are only weakly the result of purposeful diversification of income risk. There is, however, some evidence that the formation of risk sharing links is aimed at pooling health risk. The paper also makes a methodological contribution to the estimation of dyadic models. _________________________________ (français) Cet article examine la façon dont se forment les réseaux informels de partage des risques à partir de données collectées aux Philippines. Nous trouvons que les ménages enquêtés choisissent des partenaires potentiels d'entraide géographiquement proches d'eux mais non économiquement distants d'eux. Nous trouvons également que l'existence d'un lien ex ante est un déterminant important des dons et prêts informels observés entre ménages. Nous concluons de ces résultats empiriques que les transactions observées entre ménages s'inscrivent dans le cadre de relations de voisinage dont l'objectif premier n'est pas la diversification des risques de revenu. En revanche, un partage des risques liés à la santé semble être à l'oeuvre. L'article fait une contribution méthodologique à travers l'estimation de modèles dyadiques.

Keywords: Network; risk-sharing; dyadic model; Philippines; réseau; partage du risque; modèle dyadique (search for similar items in EconPapers)
JEL-codes: C49 D85 O12 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2005-11
New Economics Papers: this item is included in nep-dev, nep-net and nep-soc
References: Add references at CitEc
Citations: View citations in EconPapers (6)

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Related works:
Journal Article: The formation of risk sharing networks (2007)
Working Paper: The Formation of Risk Sharing Networks (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:dia:wpaper:dt200513

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