Does Finance Make Us Less Social?

Henrik Cronqvist (First Author), Mitch Warachka (Participant Author), Fang Yu (Participant Author)

Research output: Contribution to journalJournal

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Informal risk sharing within social networks and formal financial contracts both enable households to manage risk. We find that financial contracting reduces participation in social networks. Specifically, increased crop insurance usage decreased local religious adherence and congregation membership in agricultural communities. Our identification utilizes the Federal Crop Insurance Reform Act of 1994 that doubled crop insurance usage nationally within a year, although changes in usage varied across counties. Difference-in-difference and Spatial First Difference tests confirm that households substituted insurance for religiosity. This substitution was associated with reductions in crop diversification and crop yields, indicating an increase in moral hazard.
Original languageEnglish
Article numberPII S0022109022000722
Number of pages33
JournalJournal of Financial and Quantitative Analysis
Early online date18 Jul 2022
Publication statusPublished - 2022

Corresponding author email

Project sponsor

Chapman University
China Europe International Business School
Erasmus University


  • Household Risk Management
  • Financial Contracts
  • Social Networks

Indexed by

  • SSCI
  • ABDC-A*
  • FT


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