Risk Sharing and Network Formation.
In this paper we examine whether risk sharing networks are formed so as to maximize the mutual gains from pooling income risk. The bene t from risk pooling is largest when households have different income pro les - e.g., different occupations - and are subjected to di¤erent sources of risk - e.g., live far apart. Gains from risk sharing therefore increase with social and geographical distance. But distance also raises the cost of interpersonal links. The net e¤ect on link formation is a prior...Expand abstract
- Working Paper Series
- Publication date:
- Local pid:
- Copyright date: