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Discussion Paper Details

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Title: Bailing out the Kids: New Evidence on Informal Insurance from one Billion Bank Transfers

Author(s): Asger Lau Andersen, Niels Johannesen and Adam Sheridan

Publication Date: June 2020

Keyword(s): altruism, Informal Insurance, private transfers and Risk Sharing

Programme Area(s): Public Economics

Abstract: We combine transaction-level data from the largest retail bank in Denmark and individual-level data from government registers to study informal insurance within social networks. Accounting for transfers in cash (money transfers) and in kind (cohabitation), we estimate that family and friends jointly replace around 7 cents of the marginal dollar lost within the bottom income decile, but much less at higher income levels. We document that informal insurance covers other adverse events than income losses: expenditure shocks, family ruptures and financial distress. Parents appear to be the key providers of informal insurance with a small amount of insurance coming from siblings and virtually none from grandparents and friends. Replacement rates vary monotonically with parent economic resources.

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Bibliographic Reference

Andersen, A, Johannesen, N and Sheridan, A. 2020. 'Bailing out the Kids: New Evidence on Informal Insurance from one Billion Bank Transfers'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=14867