Risk Pooling, Risk Preferences, and Social Networks

Attanasio, Orazio; Barr, Abigail; Cárdenas, Juan Camilo; Genicot, Garance; Meghir, Costas

doi:10.1257/app.4.2.134

Cited by 131 publications

(120 citation statements)

References 19 publications

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“…The prize of 40 Birr corresponds to about US $6 in purchasing power parity (World Bank 2013), for an overall expected payoff from participating equal to $3 PPP for a risk neutral participant. Considering that most of our subjects live on less than a Dollar a day, the money at stake was significant and well in line with stakes in similar experiments (Attanasio, Barr, Cardenas, Genicot and Meghir, 2012;Yesuf and Bluffstone, 2009). We used a total of 7 choice lists, which offered a prize of 40 Birr with probabilities of p = {0.…”

Section: Experimental Tasks and Explanationssupporting

confidence: 74%

Measuring Risk Preferences in Rural Ethiopia: Risk Tolerance and Exogenous Income Proxies

Vieider¹,

Beyene²,

Bluffstone³

et al. 2014

Policy Research Working Papers

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Discussion papers of the WZB serve to disseminate the research results of work in progress prior to publication to encourage the exchange of ideas and academic debate. Inclusion of a paper in the discussion paper series does not constitute publication and should not limit publication in any other venue. The discussion papers published by the WZB represent the views of the respective author(s) and not of the institute as a whole. Terms of use: Documents inWissenschaftszentrum Berlin für Sozialforschung gGmbH Reichpietschufer 50 10785 Berlin Germany www.wzb.eu AbstractMeasuring risk preferences in rural Ethiopia: Risk tolerance and exogenous income proxies by Ferdinand M. Vieider, Abebe Beyene, Randall Bluffstone, Sahan Dissanayake, Zenebe Gebreegziabher, Peter Martinsson and Alemu Mekonnen * Risk aversion has generally been found to decrease in income or wealth. This may lead one to expect that poor countries will be more risk averse than rich countries. Recent comparative findings with students, however, suggest the opposite, giving rise to a riskincome paradox. We test this paradox by measuring the risk preferences of over 500 household heads spread over the highlands of Ethiopia. We do so using certainty equivalents, which have rarely been used in developing countries, but permit us to relate the findings to a host of evidence from the West. We find high degrees of risk tolerance, in agreement with the student comparisons finding higher risk tolerance in poorer countries. We also find risk tolerance to increase in income proxies, thus completing the paradox. We thereby use income proxies that can be considered as exogenous, allowing us to conclude that at least part of the causality must run from income to risk tolerance. We furthermore provide extensive methodological discussions on measuring and estimating risk preferences in development settings.

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Section: Experimental Tasks and Explanationssupporting

confidence: 74%

Measuring Risk Preferences in Rural Ethiopia: Risk Tolerance and Exogenous Income Proxies

Vieider¹,

Beyene²,

Bluffstone³

et al. 2014

Policy Research Working Papers

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“…Along the lines of the first explanation, Chandrasekhar et al (2011) and Attanasio et al (2012) show that play in experiments in India and Colombia respectively are in line with a model including both limited commitment and hidden information. Along the lines of the second explanation, Ligon (1998) shows that income and consumption patterns in different villages better fit different models.…”

Section: Introductionmentioning

confidence: 58%

Structural Experimentation to Distinguish between Models of Risk Sharing with Frictions in Rural Paraguay

Ligon

Schechter

2017

SSRN Journal

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Abstract. We conduct dictator-type games in rural Paraguay; different treatments involve manipulating players' information and choice sets. From individuals' choices in the games, we draw inferences regarding impediments to efficient risk sharing. Behavior in the games suggests that players in some villages are reacting to the kinds of incentives we would expect under private information, while in others players direct payoffs to recipients in a manner consistent with limited commitment. Overall we rule out full insurance, hidden investment alone, and limited commitment alone in favor of an environment with both hidden investment and limited commitment, though there is considerable variation across villages.JEL codes: C93, D85, D86, and O17.

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“…For example, List et al (2004), Leider et al (2009), andDellaVigna et al (2011) try to measure the 'why' of sharing, and find that social pressure and incentive-based motives are important. Barr and Genicot (2008) and Attanasio et al (2009) try to understand the 'who' of sharing. But the 'why' and the 'who' are closely linked questions: one of our contributions is to show that when villagers are able to choose with whom they share this has important consequences for why they share.…”

Section: Related Literaturementioning

confidence: 99%

“…The two recent papers studying the 'who' of sharing are Barr and Genicot (2008) and Attanasio et al (2009). For the experiments reported in these papers subjects form risk-pooling groups.…”

Section: Related Literaturementioning

confidence: 99%

Motives for sharing in social networks

Ligon

Schechter

2012

Journal of Development Economics

104

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What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variation in sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related (sanctions and reciprocity). We observe high average levels of sharing in our baseline treatment, while variation across individuals depends importantly on the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed 'real-world' gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment.JEL codes: C92, C93, D03, D64, D85, O17.$ Schechter thanks the Wisconsin Alumni Research Foundation, the Russell Sage Foundation, and the Delta Foundation for funding. We are grateful to Idelin Molinas and everyone at Instituto Desarrollo for their support and advice while in Paraguay. Paul Niehaus, several anonymous referees, and seminar participants at Dartmouth, Maryland, Ohio State, Princeton, UC Berkeley, Yale, BREAD at Duke, MWIEDC at UW Madison, and SITE at Stanford provided helpful comments.

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Risk Pooling, Risk Preferences, and Social Networks

Cited by 131 publications

References 19 publications

Measuring Risk Preferences in Rural Ethiopia: Risk Tolerance and Exogenous Income Proxies

Measuring Risk Preferences in Rural Ethiopia: Risk Tolerance and Exogenous Income Proxies

Structural Experimentation to Distinguish between Models of Risk Sharing with Frictions in Rural Paraguay

Motives for sharing in social networks

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