Risk Sharing and Transactions Costs: Evidence from Kenya’'s Mobile Money Revolution

Tavneet Suri
William Jack
Publication Type: 
Papers
Publication Article File: 
Journal Name: 
American Economic Review
Journal Volume: 
Forthcoming
Publication Year: 
2013

We explore the impact of reduced transaction costs on risk sharing by estimating the effect of mobile money on household consumption. Over a two-year period, household adoption increased from 43 to 70 percent, while the number of cash-in and cash-out agents increased four-fold. Using panel data we collected, we found that while shocks reduce per capita consumption by 7 percent for non-user households, the consumption of households with access is unaffected. The mechanism underlying this effect is an increase in remittances received, in number, size, and diversity of senders. A falsification test using data prior to the innovation supports these results.

JEL Codes: 
O16, O17, O33
Region: 
Africa (Sub-Sahara)
Country: 
Kenya
Topic: 
Mobile Financial Services
Topic: 
Informal Economy
Topic: 
Risk
Topic: 
Savings
Topic: 
Consumption
Topic: 
Payments Systems