Social Network,Risk Sharing And Peasant Household Saving Rate

As social security system has not yet been fully established in China's vast rural areas, peasant households usually rely on the mutual help from their relatives and friends to cope with risks and survive shocks. This paper, using CFPS data, aims to explore the risk sharing mechanism to peasant households saving within social network and investigate how social network impact their saving rate. The author suggests the following:(1) Social network facilitates significantly reducing peasant households' saving rate. The result is still robust after considering unobservable factors such as ability, tradition and preference.(2) Social network is likely to reduce peasant households' saving rate via the mechanism of risk sharing.(3) After further sorting social network, we find that ?strong ties?, eg. relatives, facilitates reducing household saving rate, while ?weak ties?, eg. friends, is insignificant. The above risk sharing mechanism among social network tends to dominate in close ties as mentioned.Policy implication of this paper is that as formal social security system has not yet been fully established in China's vast rural areas, the government should pay attention to nurturing social capital of peasant households and take full advantage of social network's role of risk sharing in order to improve peasant households' ability to cope with risks.