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Propagation and Insurance in Village Networks

  • Cynthia Kinnan
  • Krislert Samphantharak
  • Robert Townsend
  • Diego Vera-Cossio
American Economic Review
vol. 114, no. 1, January 2024
(pp. 252-84)
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Abstract

Firms in developing countries are embedded in supply chains and labor networks. These linkages may propagate or attenuate shocks. Using panel data from Thai villages, we document three facts: as households facing idiosyncratic shocks adjust their production, these shocks propagate to other households on both the production and consumption sides; propagation is greater via labor than supply chain links; and shocks in denser networks and to more central households propagate more, while access to formal or informal insurance reduces propagation. Social benefits from expanding safety nets may be higher than private benefits.

Citation

Kinnan, Cynthia, Krislert Samphantharak, Robert Townsend, and Diego Vera-Cossio. 2024. "Propagation and Insurance in Village Networks." American Economic Review, 114 (1): 252-84. DOI: 10.1257/aer.20220892

Additional Materials

JEL Classification

  • D13 Household Production and Intrahousehold Allocation
  • D22 Firm Behavior: Empirical Analysis
  • G22 Insurance; Insurance Companies; Actuarial Studies
  • I10 Health: General
  • L14 Transactional Relationships; Contracts and Reputation; Networks
  • L26 Entrepreneurship
  • O10 Economic Development: General