@article {44, title = {Consumption Risk-sharing in Social Networks}, journal = {American Economic Review}, volume = {104}, number = {1}, year = {2014}, pages = {149-82}, abstract = {We develop a model in which connections between individuals serve as social collateral to enforce informal insurance payments. We show that: (1) The degree of insurance is governed by the expansiveness of the network, measured with the per capita number of connections that groups have with the rest of the community. Two-dimensional networks---like real-world networks in Peruvian villages---are sufficiently expansive to allow very good risk-sharing. (2) In second-best arrangements, insurance is local: agents fully share shocks within, but imperfectly between endogenously emerging risk-sharing groups. We also discuss how endogenous social collateral affects our results. (JEL D02, D31, D70)}, url = {https://doi.org/10.1257/aer.104.1.149}, author = {Attila Ambrus and Markus Mobius and Adam Szeidl} }