Sering's Talk: Barriers to Efficient Risk Sharing in Village Economies Examined Through The Lens of Heterogeneous 'Social Capital'

“Risk is an inherent part of the livelihood of rural households in developing countries-climatic and health conditions, loss of property and livestock among others. The absence of insurance (formal or informal) in these communities imply that idiosyncratic shocks affect household consumption and welfare through lower income. Long-term effects of these shocks may result in poverty-traps affecting quality of nutrition and health outcomes; low investments in agriculture and education etc. Strategies used (or developed) to deal with risk (ex-ante and/or ex-poste) have become a huge area of research. Empirical studies on the effectiveness of self-insurance (diversifying economic activities, savings and borrowing) and informal insurance (risk sharing or systems of mutual support) generally report that full-insurance does not occur. Barriers to the effectiveness of the latter which have been cited in the literature include- moral hazard, limited commitment, and (more recently) hidden output/income. An understanding of these barriers including how they constrain the efficiency of risk sharing is crucial for policy. We consider the extent to which barriers to informal risk sharing are sensitive to heterogeneity in social connectedness. To examine this, we use indicators of household social connectedness/visibility which are: common-knowledge (such as position in society or parent's position); and private information (such as self-reported social network or investments to preserving social ties) ex-ante and ex-poste to risk sharing agreement.”

Contact Sering

• E-Mail:                      st340@hw.ac.uk

Seemanti talked about 'Breaking Belief': Mitigating the impact of adversity before the impact stabilizes

“If we believe that success exhaustively depends on two factors, precisely luck (which constitutes all external factors that is not in our control) and our own effort, the only way to maximize the probability of success is by maximising our effort since external factors are out of our control. For the ones stuck in poverty trap this holds a larger merit since they are externally constrained and the probability of success that can be attributed to 'luck' is barely minimal. Also, considering the marginal benefit of effort is going to be lower for the poor, higher effort is required from their side to maximize the probability of success. Such is the significance of effort chosen by the poor. Much light has been thrown upon how the experience of adversity restricts the cognitive ability or attention allocation ability of the people trapped in chronic poverty. However, these and many more such attributes may only reduce the ability of the poor to give effort. How about the willingness to persistently give effort? How does the experience of adversity impact the choice of effort? Is there any channel that could be intervened to mitigate this impact of adversity? This paper is an attempt to throw some light on these questions.”

Contact Seemanti

• E-Mail:                      s.ghosh.1@research.gla.ac.uk