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Self-Production, Friction, and Risk Sharing against Disasters: Evidence from a developing country

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  • SAWADA Yasuyuki
  • NAKATA Hiroyuki
  • KOTERA Tomoaki

Abstract

This paper uses a unique household data set collected in Vietnam to empirically test the necessary conditions for an extended version of the consumption risk-sharing hypothesis. The test explicitly incorporates self-production and uses natural disasters such as avian influenza, droughts, and floods to identify the effectiveness of market and non-market risk-sharing mechanisms. With these additional treatments, full risk sharing cannot be rejected, which suggests the presence of omitted variable bias in existing studies that reject full risk sharing. We also find that credit constraints have a significant impact, although limited commitment is not necessarily serious.

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  • SAWADA Yasuyuki & NAKATA Hiroyuki & KOTERA Tomoaki, 2011. "Self-Production, Friction, and Risk Sharing against Disasters: Evidence from a developing country," Discussion papers 11017, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:11017
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    3. Yasuyuki Sawada, 2017. "Disasters, Household Decisions, and Insurance Mechanisms: A Review of Evidence and a Case Study from a Developing Country in Asia," Asian Economic Policy Review, Japan Center for Economic Research, vol. 12(1), pages 18-40, January.
    4. SAWADA Yasuyuki & MASAKI Tatsujiro & NAKATA Hiroyuki & SEKIGUCHI Kunio, 2017. "Natural Disasters: Financial preparedness of corporate Japan," Discussion papers 17014, Research Institute of Economy, Trade and Industry (RIETI).
    5. Malek, Mohammad Abdul & Kikkawa, Aiko & Azad, Abul Kalam & Sawada, Yasuyuki, 2022. "Rural Development in Bangladesh Over Four Decades: Findings from Mahabub Hossain Panel Data and the Way Forward," ADBI Working Papers 1350, Asian Development Bank Institute.
    6. Hillesland, Marya, 2019. "Gender differences in risk behavior: An analysis of asset allocation decisions in Ghana," World Development, Elsevier, vol. 117(C), pages 127-137.

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