Risk Sharing and Transactions Costs: Evidence from Kenya's Mobile Money Revolution
American Economic Review · 2014 · Volume 104 · Issue 1
Abstract
We explore the impact of reduced transaction costs on risk sharing by estimating the effects of a mobile money innovation on consumption. In our panel sample, adoption of the innovation increased from 43 to 70 percent. We find that, while shocks reduce consumption by 7 percent for nonusers, the consumption of user households is unaffected. The mechanisms underlying these consumption effects are increases in remittances received and the diversity of senders. We report robustness checks supporting these results and use the four-fold expansion of the mobile money agent network as a source of exogenous variation in access to the innovation.
Keywords
Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems, Insurance, Insurance Companies, Actuarial Studies, Economic Development: Financial Markets, Saving and Capital Investment, Corporate Finance and Governance, Formal and Informal Sectors, Shadow Economy, Institutional Arrangements, Economic Sociology, Economic Anthropology, Social and Economic Stratification
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