Propagation and Insurance in Village Networks
43 Pages Posted: 16 Nov 2020 Last revised: 2 Apr 2023
Date Written: November 2020
Abstract
Firms in developing countries are embedded in supply chains and labor networks. These linkages may propagate or attenuate shocks. Using panel data from Thai villages, we document three facts: as households facing idiosyncratic shocks adjust their production, these shocks propagate to other households on both the production and consumption sides; propagation is greater via labor than supply chain links; and shocks in denser networks and to more central households propagate more, while access to formal or informal insurance reduces propagation. Social benefits from expanding safety nets may be higher than private benefits.
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