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Consumption Insurance in Networks with Asymmetric Information -- by Orazio Attanasio, Sonya Krutikova

This paper uses a dataset from Tanzania that contains information on consumption, income and income shocks within and across family networks. A unique feature of this data is that it contains data on the degree of information existing between each pair of households within family networks. We use these data to construct a novel measure of the quality of information both at the level of household pairs and at the level of the network. We study risk sharing within these networks and explore whether the rejection of perfect risk sharing that we observe can be related to imperfections in the information network members have about each. We show that households within family networks with better information are less vulnerable to idiosyncratic shocks. Next, using the same information, we characterise the position of households within the family net- works constructing measures of network centrality. We show that more central households within networks are less vulnerable to idiosyncratic shocks.
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