Spatial vs. Social Network Effects in Risk Sharing

Takeshi Aida

No 89, Working Papers from JICA Research Institute

Abstract: Although substantial research has been conducted on informal consumption smoothing mechanisms within villages, or within social clusters such as family and friends, few studies have compared the effects of these spatial and social networks. Employing spatial panel econometric models, this study extends the conventional empirical test of the full risk-sharing hypothesis to incorporate spatial and social network effects, and quantifies the diffusion of income shocks in each network. Estimation results based on household survey data in Southern Sri Lanka show that consumption smoothing performs better in spatial networks than in social ones, because income shocks defuse more effectively among neighboring households. This study also shows the limitations of the conventional test when it is considered a special case of a spatial econometric model.

Keywords: risk sharing; network; kinship; spillover effect (search for similar items in EconPapers)
Date: 2015-03-09
New Economics Papers: this item is included in nep-net, nep-soc and nep-ure
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Spatial vs. Social Network Effects in Risk Sharing (2015)
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