This paper conducts risk-sharing tests using detailed data on all insurance networks within a village in Tanzania; networks are not clustered but largely overlapping. It tests whether full risk-sharing occurs within these networks. Findings: - when respondents in Nyakatoke were asked to mention the two worst shocks over the past 10 years, health shocks were most frequently mentioned
- in well over half of these cases, the illness was reported to have severely cut back the daily consumption of the household and only 8% reported to have suffered no loss in consumption. Formal statistical analysis confirms these self-reported data
- households fail to cope with severe health shocks. They have to cut back non-food consumption drastically to cope with the loss of income and to pay their medical bills
- this result is all the more striking, because we have tested full insurance in small networks of self-selected households. Cash-related full insurance is not achieved, not even in very small networks. At the same time, we find that networks matter for consumption smoothing, and the village is not the appropriate unit for partial or full risk-sharing analysis
The paper argues that one reason for this failure may be that, even at this level, problems of information and enforcement distort optimal outcomes. Another reason may be that Pareto-efficiency is not achieved because all networks are intertwined with each other. If households have obligations in several networks at the same time, then full insurance would imply insuring your network partner for any claims made upon him by his other partners (with whom you might not have a direct link). It is quite conceivable that households have built in contingencies to limit such reinsurance claims and that this prevents full insurance to be attained, even within the confines of small networks. Very little work has been done on frictions in flows of resources between different insurance networks. | 
