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สถาบันวิจัยเศรษฐกิจป๋วย อึ๊งภากรณ์
Puey Ungphakorn
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Call for Papers: PIER Research Workshop 2025
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9 September 2019
20191567987200000
No. 115

Insurance and Propagation in Village Networks

Abstract

We study the dual role of networks in providing insurance and in propagating idiosyncratic shocks by using variation in the timing of severe shocks on health spending experienced by households in Thai villages. We find no impacts on food consumption. Smoothing is largely achieved through local gift and loan networks. However, insurance is partial for some households so they adjust their production decisions-drawing on their working capital, cutting input spending, and reducing labor hiring, hence propagating the shocks to other households. We find that upstream businesses close to the underinsured households in the supply chain network experience reduced local sales and increased inventories. Likewise, workers closer to the underinsured households in the labor network experience declined probability of working locally and reduced earnings. We find evidence of ex-post adjustments of these upstream households through shifting resources towards activities with lower exposure to local shocks. Our results suggest that social (village-level) gains of expanding health insurance might be higher than private (household-level) gains.

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JEL: D13D22I15Q12
Tags: entrepreneurshiprisk sharingpropagationproduction networks
The views expressed in this workshop do not necessarily reflect the views of the Puey Ungphakorn Institute for Economic Research or the Bank of Thailand.
Cynthia Kinnan
Cynthia Kinnan
Krislert Samphantharak
Krislert Samphantharak
University of California San Diego
Robert Townsend
Robert Townsend
Massachusetts Institute of Technology
Diego Vera-Cossio
Diego Vera-Cossio

Puey Ungphakorn Institute for Economic Research

273 Samsen Rd, Phra Nakhon, Bangkok 10200

Phone: 0-2283-6066

Email: pier@bot.or.th

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