Heterogeneity and the formation of risk-sharing coalitions

Fernando Jaramillo (), Hubert Kempf () and Fabien Moizeau

Post-Print from HAL

Abstract: We study the relationship between the distribution of individuals' attributes over the pop-ulation and the extent of risk sharing in a risky environment. We consider a society where individuals voluntarily form risk-sharing groups in the absence of financial markets. We obtain a partition of society into distinct coalitions leading to partial risk sharing. When individuals differ only with respect to risk, the partition is homophily-based: the less risky agents congreg-ate together and reject more risky ones into other coalitions. The distribution of risk affects the number and size of these coalitions. It turns out that individuals may pay a lower risk premium in more risky societies. We show that a higher heterogeneity in risk leads to a lower degree of partial risk sharing. The case of heterogenous risk aversion generates similar results. The empirical evidence on partial risk sharing can be understood when the endogenous partition of society into risk-sharing coalitions is taken into account.

Keywords: Risk Sharing; Group Membership (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-cdm and nep-rmg
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-01075648v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in Journal of Development Economics, 2015, 114, pp.79-96. ⟨10.1016/j.jdeveco.2014.09.003⟩

Downloads: (external link)
https://shs.hal.science/halshs-01075648v1/document (application/pdf)

Related works:
Journal Article: Heterogeneity and the formation of risk-sharing coalitions (2015)
Working Paper: Heterogeneity and the formation of risk-sharing coalitions (2015)
Working Paper: Heterogeneity and the formation of risk-sharing coalitions (2015)
Working Paper: Heterogeneity and the formation of risk - sharing coalitions (2013)
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:hal:journl:halshs-01075648

DOI: 10.1016/j.jdeveco.2014.09.003

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().