Risk Sharing and Mobile Phones: Evidence in the Aftermath of Natural Disasters

We provide empirical evidence that an early form of "mobile money" is used to share risk. Our analysis uses a unique dataset containing the entire universe of one country's mobile phone communications over a four-year period, and exploits spatio-temporal variation in communication caused by earthquakes and floods. We show that individuals are significantly more likely to send money to people affected by economic shocks, and that gifts are driven more by a desire for reciprocity than purely altruistic motives.

Datalab Faculty

Joshua Blumenstock


Nathan Eagle (Santa Fe Institute), Marcel Fafchamps (Stanford)

Project Description

We provide empirical evidence that an early form of "mobile money" is used to share risk. Our analysis is based on the entire universe of mobile phone-based communications over a four-year period in Rwanda, including millions of interpersonal transfers sent over the mobile phone network. Exploiting the quasi-random timing and location of natural disasters, we show that people make transfers to individuals affected by economic shocks. The magnitude of these transfers is small in absolute terms, but statistically strong. Unlike other documented forms of risk sharing, the mobile-phone based transfers are sent over large geographic distances and in response to covariate shocks. Transfers are more likely to be sent to wealthy individuals, and are sent predominantly between pairs of individuals with a strong history of reciprocal exchange

<iframe src="//player.vimeo.com/video/27316698" width="500" height="375" frameborder="0" webkitallowfullscreen mozallowfullscreen allowfullscreen></iframe> <p><a href="http://vimeo.com/27316698">Rwanda Call Traffic on Day of Earthquake</a> from <a href="http://vimeo.com/user8008728">Joshua Blumenstock</a> on <a href="https://vimeo.com">Vimeo</a>.</p>