Assessing the impact of public transfers on private risk sharing arrangements : evidence from a randomized experiment in Mexico

Files in This Item:
File Description SizeFormat 
gearywp200807.pdf721.34 kBAdobe PDFDownload
Title: Assessing the impact of public transfers on private risk sharing arrangements : evidence from a randomized experiment in Mexico
Authors: Pavan, Marina
Colussi, Aldo
Permanent link: http://hdl.handle.net/10197/1931
Date: 27-Feb-2008
Abstract: We adopt a structural approach to studying the effects of public transfers on consumption smoothing, risk sharing and welfare in small village economies. We calibrate the key parameters of a dynamic limited commitment model using data gathered as part of the Mexican Progresa program, and take advantage of the randomized experimental design of the data to validate the model using the treatment sample. The limited commitment model enriched to allow for unobserved heterogeneity in preferences can reasonably well explain consumption dynamics and cross-sectional distributions. The calibrated model correctly predicts the increase in consumption smoothing of transfers’ recipients, and the decrease in risk sharing between beneficiaries and non beneficiaries of the program. Progresa transfers are found to crowd-out between 3% and 10% of the pre-existing private transfers, but the overall direct effect of the subsidy on consumption is welfare improving for all households. Last, we use our structural model to evaluate a counterfactual, fully funded, insurance scheme.
Type of material: Working Paper
Publisher: University College Dublin. Geary Institute
Keywords: Risk sharing;Limited commitment;Crowding-out;Transfers programs
Subject LCSH: Consumption (Economics)--Mexico
Crowding out (Economics)--Mexico
Transfer payments--Mexico
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Geary Institute Working Papers

Show full item record

Google ScholarTM

Check


This item is available under the Attribution-NonCommercial-NoDerivs 3.0 Ireland. No item may be reproduced for commercial purposes. For other possible restrictions on use please refer to the publisher's URL where this is made available, or to notes contained in the item itself. Other terms may apply.