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dc.titleInsurance and Propagation in Village Networks
dc.contributor.authorKinnan, Cynthia
dc.contributor.authorSamphantharak, Krislert
dc.contributor.authorTownsend, Robert
dc.contributor.authorVera-Cossio, Diego A.
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageThailand
dc.date.available2020-11-23T00:00:00
dc.date.issue2020-11-23T00:00:00
dc.description.abstractIn village economies, insurance networks are key to smoothing shocks, while production networks can propagate them. The interplay of these networks is crucial. We show that a significant health expenditure shock to one household propagates to other linked households via supply-chain and labor networks. Imperfectly insured households adjust production decisionscutting input spending and reducing labor hiringaffecting households with whom they trade inputs and labor. Household businesses proximate to shocked households in the supply chain network experience reduced local sales, and those proximate in the labor network experience a lower probability of working locally. As a result, indirectly shocked households earnings and consumption fall. These declines persist over several years because networks are rigid: households appear unable to form new linkages when existing links experience negative shocks. Propagation is a function of access to insurance networks: well-insured households do not cut spending when hit by shocks, leading to minimal propagation. A simple back-of-the-envelope exercise suggests that the total magnitude of indirect effects may be larger than the direct effects and that social (village-level) gains from expanding safety nets such as health insurance may be substantially higher than private (household-level) gains.
dc.format.extent72
dc.identifier.doihttp://dx.doi.org/10.18235/0001846
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Insurance-and-Propagation-in-Village-Networks.pdf
dc.language.isoen
dc.mediumAdobe PDF
dc.publisherInter-American Development Bank
dc.subjectSupply Chain
dc.subjectEntrepreneurship
dc.subjectLabor Market
dc.subjectSmall Business
dc.subjectInsurance
dc.subjectSocial Network
dc.subject.jelcodeQ12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
dc.subject.jelcodeO10 - Economic Development: General
dc.subject.jelcodeD22 - Firm Behavior: Empirical Analysis
dc.subject.jelcodeI15 - Health and Economic Development
dc.subject.jelcodeD13 - Household Production and Intrahousehold Allocation
dc.subject.keywordsentrepreneurship;Production networks;Risk sharing;Propagation
dc.typeWorking Papers
idb.identifier.pubnumberIDB-WP-01155
idb.operationRG-K1462
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