Altruism and Risk Sharing in Networks

Renaud Bourlès (), Yann Bramoullé and Eduardo Perez

SciencePo Working papers from HAL

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: 2018-11-01
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03603020v1
References: Add references at CitEc
Citations:

Downloads: (external link)
https://sciencespo.hal.science/hal-03603020v1/document (application/pdf)

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:hal:wpspec:hal-03603020

Access Statistics for this paper

More papers in SciencePo Working papers from HAL
Bibliographic data for series maintained by Contact - Sciences Po Departement of Economics ().