Risk Sharing Networks in Rural Philippines

Marcel Fafchamps and Susan Lund

Working Papers from Stanford University, Department of Economics

Abstract: Using original data on gifts and loans, this paper investigates how rural Filipino households deal with income and expenditure shocks. Results indicate that gifts and informal loans are partly motivated by consumption smoothing motives but do not serve to efficiently share risk. Certain shocks are better insured through gifts and loans than others. Mutual insurance does not take place at the village level; rather, households receive help primarily through networks of friends and relatives. Network quality matters. Risk is shared through flexible, zero interest informal loans rather than gifts. The evidence is consistent with models of quasi-credit where enforcement constraints limit gift giving.

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Related works:
Journal Article: Risk-sharing networks in rural Philippines (2003)
Working Paper: Risk-Sharing Networks in Rural Philippines (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:wop:stanec:97014

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