Kinship and Financial Networks, Formal Financial Access, and Risk Reduction
Kinship networks are beneficial for smoothing consumption and investment, but the channels are not well understood. We study the financing devices used for consumption and investment by Thai households. Households that are connected to banks achieve significantly better consumption smoothing than un...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
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American Economic Association
2012
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| Online Access: | http://hdl.handle.net/1721.1/73141 https://orcid.org/0000-0002-1528-8102 |
| _version_ | 1826193010796265472 |
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| author | Kinnan, Cynthia Townsend, Robert |
| author2 | Massachusetts Institute of Technology. Department of Economics |
| author_facet | Massachusetts Institute of Technology. Department of Economics Kinnan, Cynthia Townsend, Robert |
| author_sort | Kinnan, Cynthia |
| collection | MIT |
| description | Kinship networks are beneficial for smoothing consumption and investment, but the channels are not well understood. We study the financing devices used for consumption and investment by Thai households. Households that are connected to banks achieve significantly better consumption smoothing than unconnected households; indirect connections via inter-household borrowing are as effective as direct borrowing. Investment appears to be facilitated by kinship: households with kin in the village display reduced sensitivity of investment to income, while connections to banks do not significantly reduce sensitivity. Kin may act as "implicit collateral," permitting borrowing that would violate repayment constraints in its absence. |
| first_indexed | 2024-09-23T09:32:36Z |
| format | Article |
| id | mit-1721.1/73141 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T09:32:36Z |
| publishDate | 2012 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/731412022-09-30T15:09:32Z Kinship and Financial Networks, Formal Financial Access, and Risk Reduction Kinnan, Cynthia Townsend, Robert Massachusetts Institute of Technology. Department of Economics Townsend, Robert Townsend, Robert Kinship networks are beneficial for smoothing consumption and investment, but the channels are not well understood. We study the financing devices used for consumption and investment by Thai households. Households that are connected to banks achieve significantly better consumption smoothing than unconnected households; indirect connections via inter-household borrowing are as effective as direct borrowing. Investment appears to be facilitated by kinship: households with kin in the village display reduced sensitivity of investment to income, while connections to banks do not significantly reduce sensitivity. Kin may act as "implicit collateral," permitting borrowing that would violate repayment constraints in its absence. John Templeton Foundation Eunice Kennedy Shriver National Institute of Child Health and Human Development (U.S.) National Science Foundation (U.S.) Bill & Melinda Gates Foundation (Consortium on Financial Systems and Poverty grant) 2012-09-24T20:22:50Z 2012-09-24T20:22:50Z 2012-05 Article http://purl.org/eprint/type/JournalArticle 0002-8282 1944-7981 http://hdl.handle.net/1721.1/73141 Kinnan, Cynthia, and Robert Townsend. “Kinship and Financial Networks, Formal Financial Access, and Risk Reduction.” American Economic Review 102.3 (2012): 289–293. Web. https://orcid.org/0000-0002-1528-8102 en_US http://dx.doi.org/10.1257/aer.102.3.289 American Economic Review 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 | Kinnan, Cynthia Townsend, Robert Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title | Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title_full | Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title_fullStr | Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title_full_unstemmed | Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title_short | Kinship and Financial Networks, Formal Financial Access, and Risk Reduction |
| title_sort | kinship and financial networks formal financial access and risk reduction |
| url | http://hdl.handle.net/1721.1/73141 https://orcid.org/0000-0002-1528-8102 |
| work_keys_str_mv | AT kinnancynthia kinshipandfinancialnetworksformalfinancialaccessandriskreduction AT townsendrobert kinshipandfinancialnetworksformalfinancialaccessandriskreduction |