In this lecture Orazio Attanasio considers the role of information asymmetry in risk sharing. Employing a unique data set from Tanzania, he is able to quantify the importance of asymmetric information in family networks and draw a connection between the resulting measures and households’ vulnerability to idiosyncratic shocks.
He shows, firstly, that his measurement of asymmetric information correlates predictably with certain variables: for example, household pairs living closer together have better information on each other than those living further apart. This evidence endorses his measurements. He also finds that members of family networks with a higher quality of information are more effective at sharing risk.
He then goes on to construct measures of network centrality relative to vulnerability, and finds that more central members are less vulnerable to idiosyncratic shocks. This evidence could have an important bearing in the design and provision of security networks and government programs.
The lecture is based on a paper whose co-author is Dr. Sonya Krutikova (Institute of Fiscal Studies, London).
Professor of Economics, University College London