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Bailing out the Kids: New Evidence on Informal Insurance from one Billion Bank Transfers

Author

Listed:
  • Asger Lau Andersen

    (CEBI, Department of Economics, University of Copenhagen)

  • Niels Johannesen

    (CEBI, Department of Economics, University of Copenhagen)

  • Adam Sheridan

    (CEBI, Department of Economics, University of Copenhagen)

Abstract

We combine transaction-level data from the largest retail bank in Denmark and individual-level data from government registers to study informal insurance within social networks. Accounting for transfers in cash (money transfers) and in kind (cohabitation), we estimate that family and friends jointly replace around 7 cents of the marginal dollar lost within the bottom income decile, but much less at higher income levels. We document that informal insurance covers other adverse events than income losses: expenditure shocks, family ruptures and financial distress. Parents appear to be the key providers of informal insurance with a small amount of insurance coming from siblings and virtually none from grandparents and friends. Replacement rates vary monotonically with parent economic resources.

Suggested Citation

  • Asger Lau Andersen & Niels Johannesen & Adam Sheridan, 2020. "Bailing out the Kids: New Evidence on Informal Insurance from one Billion Bank Transfers," CEBI working paper series 20-19, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    • Handle: RePEc:kud:kucebi:2019
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    Cited by:

    1. Asger Lau Andersen & Niels Johannesen & Mia Jørgensen & José-Luis Peydró, 2020. "Monetary policy and inequality," Economics Working Papers 1761, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2021.
    2. Lindahl, Erica & Rosenqvist, Olof & Selin, Håkan, 2023. "Gender-targeted transfers by default? - Evidence from a child allowance reform in Sweden," Labour Economics, Elsevier, vol. 83(C).
    3. Lindahl, Erica & Rosenqvist, Olof & Selin, Håkan, 2023. "Gender-targeted transfers by default? - Evidence from a child allowance reform in Sweden," Labour Economics, Elsevier, vol. 83(C).

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    More about this item

    Keywords

    informal insurance; altruism; private transfers; risk sharing;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D6 - Microeconomics - - Welfare Economics
    • G5 - Financial Economics - - Household Finance

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