Working Paper: NBER ID: w27290
Authors: Orazio Attanasio; Sonya Krutikova
Abstract: This paper uses a dataset from Tanzania with information on consumption, income and income shocks within and across family networks. Crucially and uniquely, it also contains data on the degree of information existing between each pair of households within family networks gCrucially and uniquely, it also contains data on the level of information each pair of households has about each other within family networks. We use these data to construct a novel measure of the quality of information both at the level of household pairs and at the level of the network. We also note that the individual level measures can be interpreted as measures of network centrality. We study risk sharing within these networks and explore whether the rejection of perfect risk sharing that we observe can be related to our measures of information quality. We show that households within family networks with better information are less vulnerable to idiosyncratic shocks. Furthermore, we show that more central households within networks are less vulnerable to idiosyncratic shocks. These results have important implications for the characterisation of the empirical failure of the perfect risk sharing hypothesis and point to the importance of information frictions.
Keywords: Consumption Insurance; Networks; Asymmetric Information; Risk Sharing
JEL Codes: O10; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| better information quality within family networks (D85) | reduced vulnerability to idiosyncratic shocks (D89) |
| better information quality within family networks (D85) | change in consumption (D12) |
| better information quality (L15) | less sensitivity to idiosyncratic shocks (E39) |
| better information quality (L15) | reduced vulnerability to idiosyncratic shocks (D89) |
| more central households (R20) | less vulnerable to shocks (F69) |