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American Economic Review: Vol. 104 No. 1 (January 2014)

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Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution

Article Citation

Jack, William, and Tavneet Suri. 2014. "Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution." American Economic Review, 104(1): 183-223.

DOI: 10.1257/aer.104.1.183

Abstract

We explore the impact of reduced transaction costs on risk sharing by estimating the effects of a mobile money innovation on consumption. In our panel sample, adoption of the innovation increased from 43 to 70 percent. We find that, while shocks reduce consumption by 7 percent for nonusers, the consumption of user households is unaffected. The mechanisms underlying these consumption effects are increases in remittances received and the diversity of senders. We report robustness checks supporting these results and use the four-fold expansion of the mobile money agent network as a source of exogenous variation in access to the innovation.

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Online Appendix (451.45 KB) | Download Data Set (386.31 KB) | Author Disclosure Statement(s) (55.97 KB)

Authors

Jack, William (Georgetown U)
Suri, Tavneet (MIT)

JEL Classifications

E42: Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
G22: Insurance; Insurance Companies; Actuarial Studies
O16: Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Z13: Economic Sociology; Economic Anthropology; Social and Economic Stratification


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