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Informal insurance in social networks

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Author Info
Bloch, Francis
Genicot, Garance
Ray, Debraj

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Abstract

This paper studies bilateral insurance schemes across networks of individuals. While transfers are based on social norms, individuals must have the incentive to comply. We investigate the structure of self-enforcing insurance networks. Network links play two distinct and possibly conflictual roles. They act as conduits for both transfers and information; affecting the scope for insurance and the severity of punishments upon noncompliance. Their interaction leads to a characterization of stable networks as suitably "sparse" networks. Thickly and thinly connected networks tend to be stable, whereas intermediate degrees of connectedness jeopardize stability. Finally, we discuss the effect of discounting on stability.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 143 (2008)
Issue (Month): 1 (November)
Pages: 36-58
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Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:36-58

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Web page: http://www.elsevier.com/locate/inca/622869

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Related research
Keywords: Social networks Reciprocity network Risk sharing Norms Informal insurance Sparseness Stable networks;

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References listed on IDEAS
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  5. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk--Sharing Arrangements," Review of Economic Studies, Blackwell Publishing, vol. 70(1), pages 87-113, January.
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  16. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Attila Ambrus & Markus Mobius & Adam Szeidl, 2007. "Consumption Risk-sharing in Social Networks," Economics Working Papers 0079, Institute for Advanced Study, School of Social Science. [Downloadable!]
  2. Adaman, Fikret & Ardic, Oya Pinar & Tuzemen, Didem, 2006. "Network Effects in Risk Sharing and Credit Market Access: Evidence from Istanbul," MPRA Paper 4078, University Library of Munich, Germany, revised 01 Dec 2006. [Downloadable!]
    Other versions:
  3. Philippe LeMay-Boucher, 2007. "Insurance for the Poor: The Case of Informal Insurance Groups in Benin," CERT Discussion Papers 0707, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
  4. Yann Bramoullé & Rachel Kranon, 2005. "Risk-Sharing Networks," Cahiers de recherche 0526, CIRPEE. [Downloadable!]
    Other versions:
  5. Ari A. Perdana, 2005. "Risk management for the poor and vulnerable," CSIS Economics Working Paper Series WPE093, Centre for Strategic and International Studies, Jakarta, Indonesia. [Downloadable!]
    Other versions:
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