Does Finance Make Us Less Social?
48 Pages Posted: 22 Aug 2018 Last revised: 10 Sep 2019
Date Written: July 22, 2019
Informal risk sharing within social networks and financial contracts both enable households to manage risk. Does the use of financial contracts affect household participation in social networks? Using an exogenous increase in crop insurance usage due to the Federal Crop Insurance Reform Act of 1994, we find an associated reduction in the number of religious adherents and the size of church congregations. In addition, consistent with an increase in moral hazard, the use of crop insurance also reduced crop diversification and crop yields.
Keywords: Household Risk Management, Social Networks, FinTech
JEL Classification: G02, G28
Suggested Citation: Suggested Citation