Follow us
Publications Commentary Research People Events News Resources and Videos About IFS
Home Publications Consumption insurance in networks with asymmetric information

Consumption insurance in networks with asymmetric information

Journal article

This paper uses a dataset from Tanzania with information on consumption, income and income shocks within and across family networks. Crucially and uniquely, it also contains data on the degree of information existing between each pair of households within family networks. We use these data to construct a novel measure of the quality of information both at the level of household pairs and at the level of the network. We also note that the individual level measures can be interpreted as measures of network centrality. We study risk sharing within these networks and explore whether the rejection of perfect risk sharing that we observe can be related to our measures of information quality. We show that households within family networks with better information are less vulnerable to idiosyncratic shocks. Furthermore, we show that more central households within networks are less vulnerable to idiosyncratic shocks. These results have important implications for the characterisation of the empirical failure of the perfect risk sharing hypothesis and point to the importance of information frictions.

More on this topic

IFS Working Paper W22/27
I provide evidence of the severe social costs imposed by infrastructure projects that are being implemented in the context of sewerage in Peru.
IFS Working Paper W22/25
We develop a model demonstrating that in-kind transfers are welfare improving to beneļ¬ciaries relative to cash if the covariance between the marginal utility of income and price is positive.
IFS Working Paper W22/18
We study how social proximity between the sender and the receiver of information shapes the effectiveness of preventive health behaviour campaigns and the persistence of misinformation.
IFS Working Paper W22/16
This paper provides novel evidence on the trade-off between public service delivery and free riding in low- and middle-income countries.