This paper examines the formation of risk sharing networks in the rural Philippines. We find that geographic proximity-possibly correlated with kinship-is a major determinant of mutual insurance links among villagers. Age and wealth differences also play an important role. In contrast, income correlation and differences in occupation are not determinants of network links. Reported network links have a strong effect on subsequent gifts and loans. Gifts between network partners are found to respond to shocks and to differences in health status. From this we conclude that intra-village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income risk. The paper also makes a methodological contribution to the estimation of dyadic models.

This article uses recent household survey data from the Kayes area (western Mali) to analyse the determinants of remittances from both internal and international migration. The underlying assumption is that remittances are part of an insurance contract between the migrant and his family. Although this idea is not new, few tests have appeared in the recent literature. After a discussion of various measures of crop income shocks, we employ Powell's censored least absolute deviation (CLAD) estimators in addition to more standard parametric estimators to assess the influence of shocks on remittance behaviour. In contrast to Heckman's two-step or the Tobit estimator, Powell's estimator is consistent in the presence of heteroscedasticity and is robust to violations of the normality assumption for the residuals. Regression results bring some support for the view that insurance is an important motivation for remittances. This welfare function should be taken into account by policy-makers in the design of migration policies.

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Interpersonal relationships have long been suspected of shaping agrarian institutions, probably because weak formal institutions must be supplemented by interpersonal trust. This is particularly true for informal risk sharing, a fundamental risk coping mechanism for the rural poor (e.g.

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