Bailing Out the Kids: New Evidence on Informal Insurance from One Billion Bank Transfers

60 Pages Posted: 16 Jun 2020

See all articles by Asger Lau Andersen

Asger Lau Andersen

University of Copenhagen - Department of Economics

Niels Johannesen

University of Copenhagen

Adam Sheridan

University of Copenhagen

Multiple version iconThere are 2 versions of this paper

Date Written: June 2020

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.

Keywords: altruism, Informal Insurance, private transfers, Risk Sharing

JEL Classification: D1, D6, G5

Suggested Citation

Andersen, Asger Lau and Johannesen, Niels and Sheridan, Adam, Bailing Out the Kids: New Evidence on Informal Insurance from One Billion Bank Transfers (June 2020). CEPR Discussion Paper No. DP14867, Available at SSRN: https://ssrn.com/abstract=3628188

Asger Lau Andersen (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Niels Johannesen

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

Adam Sheridan

University of Copenhagen ( email )

Nørregade 10
Copenhagen, København DK-1165
Denmark

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