Risk sharing and private transfers: What about urban households?

One of the reasons why there is so little evidence concerning urban risk sharing is that the urban counterparts of data sets used by economists to study the rural sector are scarce. This article uses a data set from Colombia that contains extensive information about private transfers, household networks, and intra-annual earnings fluctuations that can be used to examine the risk-sharing hypothesis. The data set has two advantages. First, survey respondents were asked detailed questions about private transfers received and given and they were also questioned about household networks and private transfers. Detailed questionnaires are far superior to the usual summary ones for measuring the extent and magnitude of private transfers. Second, although the data set is cross-sectional, it contains information about intra-annual income variability that is useful for investigating the connection between stability in incomes and transfer behavior. One of the salient findings in the empirical work below is that the stabilization of household incomes would likely be associated with a sharp reduction in private transfer activity.