The Formation of Risk Sharing Networks.

This paper examines the formation of risk sharing networks in the rural Philippines. We find that geographic proximity–possibly correlated with kinship–is a major determinant of mutual insurance links among villagers. Age and wealth differences also play an important role. In contrast, income correlation and differences in occupation are not determinants of network links. Reported network links have a strong effect on subsequent gifts and loans. Gifts between network partners are found to respond to shocks and to differences in health status. From this we conclude that intra-village mutual insurance links are largely determined by social and geographical proximity and are only weakly the result of purposeful diversification of income risk. The paper also makes a methodological contribution to the estimation of dyadic models.partage du risque; modèle dyadique; dyadic model; Philippines; Network; risk-sharing; Réseau;

Contingent Loan Repayment in the Philippines.

Using data from the Philippines, this article seeks to understand how households in the study area apparently manage to avoid falling into a debt trap in spite of frequent borrowing. Findings suggest that this is achieved via three institutional features. First, most informal debt carries no interest. Second, for all debts, repayment is postponed in case of a borrower’s difficulty; this is the only insurance feature of debt repayment. Third, while debt principal is seldom forgiven or reduced, interest‐bearing debt does not carry additional interest if debt repayment is delayed. This prevents interest charges from accumulating and debt from snowballing.Dette; Crédit;

Risk and Schooling Decisions in Rural Madagascar: a Panel Data Analysis.

La plupart des ménages ruraux malgaches tirent l’essentiel de leurs revenus de l’agriculture et sont exposés à un fort degré d’incertitude en raison de la fréquence et de l’intensité des aléas frappant les champs de culture ou les troupeaux. En l’absence de marchés du crédit ou de l’assurance, des moyens alternatifs pour éliminer ou atténuer les conséquences défavorables de cette incertitude doivent être trouvés par les ménages. Dans cet article, nous envisageons la possibilité que la mise au travail des enfants constitue un mécanisme de gestion des risques. Afin de tester cette hypothèse, nous examinons les déterminants de la scolarisation en cycle primaire d’un échantillon d’enfants issus de ménages ruraux. Nous examinons notamment le rôle des chocs de revenu subis par les ménages sur les probabilités d’entrée (dans) et de sortie hors de l’école de leurs membres en âge d’être scolarisés, en portant une attention particulière aux questions de genre et d’allocation intra-ménage des ressources. Les résultats indiquent que les chocs transitoires de revenu ont un impact significatif sur la probabilité de sortie de l’école mais pas sur la probabilité d’entrer à l’école. Cela suggère que la déscolarisation des enfants les plus âgés constitue un mécanisme de gestion du risque pour les ménages ruraux.Most households in rural Madagascar are engaged in agriculture and derive a large share of their income from the production of food or cash crops and from animal husbandry. However, agricultural yields can be extremely volatile due to weather conditions, pests, insects, rodents and other calamities. As a result, households record large fluctuations in their incomes that must be dealt with. Since the usual consumption-smoothing market mechanisms are quite limited in the Malagasy context, households need to rely on nonmarket mechanisms or to adopt multi-faceted strategies to cope with risk. In this paper, we examine the possibility that parents obtain informal income insurance by letting their children work. We test this hypothesis by examining the relationship between household income shocks and human capital investment in children. In particular, we investigate whether children’s propensity to join school and to drop out of school responds to transient shocks. We also investigate issues such as gender and intrahousehold resource allocation.Stratégies de gestion des risques; Risk-coping strategies; Décision de scolarisation; Schooling decisions; Transitory shocks; Chocs transitoires;

Migration, self selection and returns to education in the WAEMU.

Using data from labour force surveys conducted simultaneously in the capital cities of seven West African Economic and Monetary Union countries, we estimate a model of residential location choice in which expected earnings play a role. The model is first estimated in a reduced form. Estimates are then used to correct for the endogeneity of locational choice in the earnings equations estimated for each country. We find that migration behaviour has a significant effect in shaping earnings differentials between education levels and between the seven capital cities. Corrected predicted earnings in each country are then used as an independent variable in a structural multinomial logit of residential choice. Results show that individuals tend to reside in countries in which their expected earnings are higher than elsewhere.Migration; Self-selection; West Africa;

Migrant Networks as a Basis for Social Control : Remittance Obligations among Senegalese in France and Italy

The economic literature provides much evidence of the positive impacts of social capital on migrants' economic outcomes, in particular through assistance upon arrival and insurance in times of hardship. Yet, although much less documented, migrant networks may well have a great influence on migrants' remittances to their home country and particularly to their origin household. Given all the services provided by the network, the fear of being ostracized by its members and being left with no support system could then provide an additional incentive for migrants to commit to prevailing remittances behavior, as an affirmation of their community membership. In this paper, we thus analyze to what extent migrant networks in the destination country influence the degree to which migrants meet the claims of those left behind. We first develop a simple principal-agent model in which remittances are the result of a contractual agreement between the migrant and his origin household and the network works as an enforcement device. We thus depart from existing models of motives for remitting which generally do not account for the close-knit networks migrants are embedded in. We then use an original data set covering Senegalese migrants residing in France and Italy to test the main predictions of our model. --