Cronqvist, Henrik

Warachka, Mitch

Yu, Fang

English

Informal risk sharing within social networks and formal financial contracts both enable households to manage risk. We find that financial contracting reduces participation in social networks. Specifically, increased crop insurance usage decreased local religious adherence and congregation membership in agricultural communities. Our identification utilizes the Federal Crop Insurance Reform Act of 1994 that doubled crop insurance usage nationally within a year, although changes in usage varied across counties. Difference-in-Difference and Spatial First Difference tests, with urban and neighboring counties as respective control groups, confirm that households substituted insurance for religiosity. This substitution was associated with an increase in moral hazard

China Europe International Business School - CEIBS Institutional Repository

Does Finance Make Us Less Social? (CEIBS Working Paper, No. 011/2020/FIN)

https://repository.ceibs.edu/ws/files/15767096/011-yu-fang_may-2020_Does%20Finance%20Make%20Us%20Less%20Social.pdf

Does Finance Make Us Less Social? (CEIBS Working Paper, No. 011/2020/FIN)

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China Europe International Business School - CEIBS Institutional Repository