Informal Risk Sharing with Local Information

• 成果类型: Article
• 署名作者: Ambrus, Attila; Gao, Wayne; Milan, Pau
• 署名单位: Duke University; University of Pennsylvania; Autonomous University of Barcelona; Barcelona School of Economics
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdab091
• 发表日期: 2022
• 页码: 2329-2380
• 关键词: insurance; consumption; COMMITMENT; CONTRACTS; networks; LDCs

摘要

This article considers the effect of contracting limitations in risk-sharing networks, arising for example from observability, verifiability, complexity, or cultural constraints. We derive necessary and sufficient conditions for Pareto efficiency under these constraints in a general setting, and we provide an explicit characterization of Pareto efficient bilateral transfer profiles under CARA utility and normally distributed endowments. Our model predicts that network centrality is positively correlated with consumption volatility, as more central agents become quasi-insurance providers to more peripheral agents. The proposed framework has important implications for the empirical specification of risk-sharing tests, allowing for local risk-sharing groups that overlap within the village network.