Risk Sharing

My current projects include the study of imperfect enforceability frictions, the investigation of risk sharing among different groups and the implication of preference heterogeneity for risk sharing.

– Insurance in Extended Family Networks

with Costas Meghir and Corina Mommaerts (March 2015, NBER WP No.21059)

Abstract: This paper analyzes the extent to which members of an extended family network insure each another against income shocks. We develop a model of intertemporal consumption that decomposes income shocks and insurance parameters into within-family and between-family components and generates a test of within-family partial insurance. To identify the model, we derive covariance restrictions between income and consumption across family members and over time. We use recent income and consumption panel data from the PSID and exploit the intergenerational structure of the data to estimate the parameters of the model.
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– Sticks and Carrots in Mexican Villages: Imperfect enforceability and subjective expectations

(Walras Bowley Lecture)


– Risk Sharing with Imperfectly Enforceable Contracts

with Melanie Morten and Jose Guerra

– Social Capital, Conflict and Risk Sharing

with Elisa Cavatorta

– Preferences and Risk Sharing

with Elisa Cavatorta and Bansi Malde

– Village Insurance in a Growing China

with Costas Meghir, Corina Mommaerts and Yu Zheng

Abstract: Over the past three decades, China has transformed itself from a centrally planned economy to a mixed economy, where markets play an increasingly important role in resource allocation. As individuals responded to the economic opportunities brought by the markets, the communal relationship that was woven into the social safety net in the 1980s and 1990s slowly disintegrated. In this paper, we document how the degree of consumption insurance against village-aggregate and idiosyncratic income risks has changed over time, for a panel of Chinese households living in 150 villages over the period of 1989 to 2009. We show the decline in the consumption insurance is closely related to economic transformations that took place in rural villages: the shift of working-age population from agriculture to employed, and often migrant, jobs, the decline of the Township-and-Village Enterprises and the national development strategy that favored growth over equity. We provide evidence in support of this interpretation by exploiting the regional heterogeneity in growth experience in the data.
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