Heterogeneity and risk sharing in village economies
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Townsend_Heterogeneity And.pdf
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Author(s)
Chiappori, Pierre-Andre
Samphantharak, Krislert
Schulhofer-Wohl, Sam
Townsend, Robert
Date Issued
March 2014
Journal
Quantitative Economics
Publisher
The Econometric Society
Citation
Chiappori, Pierre-André, Krislert Samphantharak, Sam Schulhofer-Wohl, and Robert M. Townsend. “Heterogeneity and Risk Sharing in Village Economies.” Quantitative Economics 5, no. 1 (March 2014): 1–27.
Version
Author's final manuscript
Abstract
We show how to use panel data on household consumption to directly estimate households' risk preferences. Specifically, we measure heterogeneity in risk aversion among households in Thai villages using a full risk-sharing model, which we then test allowing for this heterogeneity. There is substantial, statistically significant heterogeneity in estimated risk preferences. Full insurance cannot be rejected. As the risk-sharing as-if-complete-markets theory might predict, estimated risk preferences are unrelated to wealth or other characteristics. The heterogeneity matters for policy: Although the average household would benefit from eliminating village-level risk, less-risk-averse households that are paid to absorb that risk would be worse off by several percent of household consumption.
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Creative Commons Attribution-Noncommercial-Share Alike
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DOI of Published Version
https://doi.org/10.3982/qe131
