American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Risk and Return in Village Economies
American Economic Journal: Microeconomics
vol. 10,
no. 1, February 2018
(pp. 1–40)
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.Citation
Samphantharak, Krislert, and Robert M. Townsend. 2018. "Risk and Return in Village Economies." American Economic Journal: Microeconomics, 10 (1): 1–40. DOI: 10.1257/mic.20160125Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D81 Criteria for Decision-Making under Risk and Uncertainty
- O12 Microeconomic Analyses of Economic Development
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O18 Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
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