Risk Sharing and Network Formation

Fafchamps, Marcel; Gubert, Flore

doi:10.1257/aer.97.2.75

Cited by 120 publications

(78 citation statements)

References 8 publications

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“…Specifically, rule (1) and Assumption 1 are appropriate for settings where the drivers of link formation are predominately bilateral in nature, as may be true in some types of friendship and trade networks as well as in models of (some types of) conflict between nation-states (e.g., Santos Silva and Tenreyro, 2006;Fafchamps and Gubert, 2007;Lai and Reiter, 2000). In such settings, as outlined below, the inclusion of unobserved agent attributes in the link formation model is a significant, and useful, generalization relative to many commonly-used models.…”

Section: Baseline Assumptionsmentioning

confidence: 99%

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An econometric model of network formation with degree heterogeneity

Graham

2017

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Section: Baseline Assumptionsmentioning

confidence: 99%

“…It augments a standard dyadic model of link formation, as used by, for example, Fafchamps and Gubert (2007), Lai and Reiter (2000), Apicella et al (2012) and Attanasio et al (2012), with agent-specific unobserved degree heterogeneity. Specifically agents freely vary in the generic surplus they generate when forming a match.…”

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confidence: 99%

An econometric model of network formation with degree heterogeneity

Graham

2017

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“…Transfers from migrants, neighbours, family or friends are well described in Fafchamps, 2007, and their importance for IBMIs literature was recently analyzed by Barnett et al, 2008. Farmers are incited to pool spatially the risks they face for instance by using private transfers.…”

Section: Risk Copingmentioning

confidence: 99%

Agricultural Insurances Based on Meteorological Indices: Realizations, Methods and Research Agenda

Leblois

Quirion

2010

SSRN Journal

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SummaryIn many low-income countries, agriculture is mostly rain-fed and yields highly depend on climatic factors. Furthermore, farmers have little access to traditional crop insurance, which suffers from high information asymmetry and transaction costs. Insurances based on meteorological indices could fill this gap since they do not face such drawbacks. However their implementation has been slow so far. In this article, we first describe the most advanced projects that have taken place in developing countries using these types of crop insurances. We then describe the methodology that has been used to design such projects, in order to choose the meteorological index, the indemnity schedule and the insurance premium. We finally draw an agenda for research in economics on this topic. In particular, more research is needed on implementation issues, on the assessment of benefits, on the way to deal with climate change, on the spatial variability of weather and on the interactions with other hedging methods. Keywords AbstractIn many low-income countries, agriculture is mostly rainfed and yields highly depend on climatic factors. Furthermore, farmers have little access to traditional crop insurance, which suffers from high information asymmetry and transaction costs. Insurances based on meteorological indices could fill this gap since they do not face such drawbacks. However their implementation has been slow so far.In this article, we first describe the most advanced projects that have taken place in developing countries using these types of crop insurances. We then describe the methodology that has been used to design such projects, in order to choose the meteorological index, the indemnity schedule and the insurance premium. We finally draw an agenda for research in economics on this topic. In particular, more research is needed on implementation issues, on the assessment of benefits, on the way to deal with climate change, on the spatial variability of weather and on the interactions with other hedging methods.

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“…The problem of enforcement and the rising costs of links with distance reduce the chance that such optimal arrangements take place (Fafchamps and Gubert, 2007b).…”

Section: Literaturementioning

confidence: 99%

The Decision to Migrate and Social Capital: Evidence from Albania

Cattaneo

2008

SSRN Journal

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SummaryThe objective of this paper is to determine whether the participation in social organizations, which are commonly defined as a form of social capital, represents a complement or a substitute with respect to emigration. The nature of the relationship depends on the motivations behind the two choices, which induce the households to join a group and to invest in migration. To address this research question a bivariate probit model is employed, in that the decision to migrate and to join a social organization are estimated simultaneously. Both temporary and permanent emigration of the household are addressed. The results of the empirical estimation reveal that families participating in social organizations are more likely to send siblings abroad permanently, as they may receive from the social network important information that is crucial for permanent emigration. Hence, social capital performs a role as complement to permanent emigration. On the other hand, social capital is associated with a lower probability of moving temporarily. This may indicate that families resort to social capital rather than to temporary circular migration to overcome contingent liquidity constraint and therefore social capital is a substitute for temporary emigration. The objective of this paper is to determine whether the participation in social organizations, which are commonly defined as a form of social capital, represents a complement or a substitute with respect to emigration. The nature of the relationship depends on the motivations behind the two choices, which induce the households to join a group and to invest in migration. To address this research question a bivariate probit model is employed, in that the decision to migrate and to join a social organization are estimated simultaneously. Both temporary and permanent emigration of the household are addressed. The results of the empirical estimation reveal that families participating in social organizations are more likely to send siblings abroad permanently, as they may receive from the social network important information that is crucial for permanent emigration. Hence, social capital performs a role as complement to permanent emigration. KeywordsOn the other hand, social capital is associated with a lower probability of moving temporarily. This may indicate that families recourse to social capital rather than to temporary circular migration to overcome contingent liquidity constraint and therefore social capital is a substitute for temporary emigration.

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Risk Sharing and Network Formation

Abstract: 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.

Cited by 120 publications

References 8 publications

An econometric model of network formation with degree heterogeneity

An econometric model of network formation with degree heterogeneity

Agricultural Insurances Based on Meteorological Indices: Realizations, Methods and Research Agenda

The Decision to Migrate and Social Capital: Evidence from Albania

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