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SUMMARY:Insurance Networks and Poverty Traps - Arun Advani (University of 
 Warwick\, IFS\, CAGE)
DTSTART;VALUE=DATE-TIME:20180502T123000
DTEND;VALUE=DATE-TIME:20180502T140000
UID:https://talks.ox.ac.uk/talks/id/d2a5e7c7-1ad8-4b05-b903-cd3cbf3c16db/
DESCRIPTION:Poor households regularly borrow and lend to smooth consumptio
 n\, yet we see much less borrowing for investment. This cannot be explaine
 d by a lack of investment opportunities\, nor by a lack of resources avail
 able collectively for investment. This paper provides a novel explanation 
 for this puzzle: investment reduces the investor's need for informal risk 
 sharing\, weakening risk-sharing ties\, and so limiting the amount of borr
 owing that can be sustained. I formalise this intuition by extending the c
 anonical model of limited commitment in risk-sharing networks to allow for
  lumpy investment. The key prediction of the model is a non-linear relatio
 nship between total income and investment at the network level -- namely t
 here is a network-level poverty trap. I test this prediction using a rando
 mised control trial in Bangladesh\, that provided capital transfers to the
  poorest households. The data cover 27\,000 households from 1\,400 village
 s\, and contain information on risk-sharing networks\, income\, and invest
 ment. I exploit variation in the number of program recipients in a network
  to identify the location of the poverty trap: the threshold level of capi
 tal provision needed at the network level for the program to generate furt
 her investment. My results highlight how capital transfer programs can be 
 made more cost-effective by targeting communities at the threshold of the 
 aggregate poverty trap.\nSpeakers:\nArun Advani (University of Warwick\, I
 FS\, CAGE)
LOCATION:Manor Road Building (Lecture Theatre)\, Manor Road OX1 3UQ
TZID:Europe/London
URL:https://talks.ox.ac.uk/talks/id/d2a5e7c7-1ad8-4b05-b903-cd3cbf3c16db/
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DESCRIPTION:Talk:Insurance Networks and Poverty Traps - Arun Advani (Unive
 rsity of Warwick\, IFS\, CAGE)
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