Risk and Return in Village Economies
This paper provides a theory-based empirical framework for understanding the risk and return on productive capital assets and their allocation across activities in an economy characterized by idiosyncratic and aggregate risk and thin formal markets for real and financial assets. We apply our framewo...
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| Format: | Article |
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American Economic Association
2018
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| Online Access: | http://hdl.handle.net/1721.1/114164 https://orcid.org/0000-0002-1528-8102 |
| _version_ | 1811083950953594880 |
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| author | Samphantharak, Krislert Townsend, Robert |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Samphantharak, Krislert Townsend, Robert |
| author_sort | Samphantharak, Krislert |
| collection | MIT |
| description | This paper provides a theory-based empirical framework for understanding the risk and return on productive capital assets and their allocation across activities in an economy characterized by idiosyncratic and aggregate risk and thin formal markets for real and financial assets. We apply our framework to households running business enterprises in Thai villages with extensive networks, taking advantage of panel data: income, assets, consumption, gifts, and loans. We decompose risk and estimate the risk premia faced by households, distinguishing aggregate risk from idiosyncratic, potentially diversifiable risk. This distinction matters for estimating measures of underlying productivity and has important policy implications. (JEL D12, D22, D24, D81, O12, O14, O18) |
| first_indexed | 2024-09-23T12:42:12Z |
| format | Article |
| id | mit-1721.1/114164 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T12:42:12Z |
| publishDate | 2018 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/1141642022-09-28T09:32:42Z Risk and Return in Village Economies Samphantharak, Krislert Townsend, Robert Massachusetts Institute of Technology. Department of Economics Townsend, Robert This paper provides a theory-based empirical framework for understanding the risk and return on productive capital assets and their allocation across activities in an economy characterized by idiosyncratic and aggregate risk and thin formal markets for real and financial assets. We apply our framework to households running business enterprises in Thai villages with extensive networks, taking advantage of panel data: income, assets, consumption, gifts, and loans. We decompose risk and estimate the risk premia faced by households, distinguishing aggregate risk from idiosyncratic, potentially diversifiable risk. This distinction matters for estimating measures of underlying productivity and has important policy implications. (JEL D12, D22, D24, D81, O12, O14, O18) Eunice Kennedy Shriver National Institute of Child Health and Human Development (U.S.) (grant number R01 HD027638) Templeton Foundation (grant number 12470) Private Enterprise Development in Low-Income Countries (Centre for Economic Policy Research (CEPR) and the Department for International Development (DFID) (contract reference MRG002_1255)) University of Chicago. Consortium on Financial Systems and Poverty (Bill & Melinda Gates Foundation (grant number 51935)) Thailand Research Fund Bank of Thailand 2018-03-15T17:42:05Z 2018-03-15T17:42:05Z 2018-02 2018-03-01T16:50:08Z Article http://purl.org/eprint/type/JournalArticle 1945-7669 1945-7685 http://hdl.handle.net/1721.1/114164 Samphantharak, Krislert, and Robert M. Townsend. “Risk and Return in Village Economies.” American Economic Journal: Microeconomics 10, no. 1 (February 2018): 1–40. © 2018 American Economic Association https://orcid.org/0000-0002-1528-8102 http://dx.doi.org/10.1257/mic.20160125 American Economic Journal: Microeconomics Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association American Economic Association |
| spellingShingle | Samphantharak, Krislert Townsend, Robert Risk and Return in Village Economies |
| title | Risk and Return in Village Economies |
| title_full | Risk and Return in Village Economies |
| title_fullStr | Risk and Return in Village Economies |
| title_full_unstemmed | Risk and Return in Village Economies |
| title_short | Risk and Return in Village Economies |
| title_sort | risk and return in village economies |
| url | http://hdl.handle.net/1721.1/114164 https://orcid.org/0000-0002-1528-8102 |
| work_keys_str_mv | AT samphantharakkrislert riskandreturninvillageeconomies AT townsendrobert riskandreturninvillageeconomies |