Risk and Return in Village Economies

64 Pages Posted: 20 Dec 2013

See all articles by Krislert Samphantharak

Krislert Samphantharak

University of California, San Diego - School of Global Policy and Strategy

Robert M. Townsend

Massachusetts Institute of Technology (MIT)

Date Written: December 2013

Abstract

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.

Suggested Citation

Samphantharak, Krislert and Townsend, Robert M., Risk and Return in Village Economies (December 2013). NBER Working Paper No. w19738. Available at SSRN: https://ssrn.com/abstract=2370194

Krislert Samphantharak (Contact Author)

University of California, San Diego - School of Global Policy and Strategy ( email )

9500 Gilman Drive
La Jolla, CA 92093-0519
United States
858-534-3939 (Fax)

Robert M. Townsend

Massachusetts Institute of Technology (MIT) ( email )

77 Massachusetts Avenue
50 Memorial Drive
Cambridge, MA 02139-4307
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
49
Abstract Views
453
PlumX Metrics