Ethnicity and Risk Sharing Network Formation: Evidence from Rural Vietnam

The ethnic divide remains a persistent challenge for Vietnam. This paper explores one mechanism that could drive ethnic inequalities by analysing risk-sharing networks in rural communes. After finding substantial differences in size and composition between ethnic minority and Kinh household networks, we explore homophily patterns in link formation as drivers of these differences. In particular, we disentangle baseline homophily stemming from the different local distributions of ethnic groups from inbreeding homophily resulting from mechanisms such as ethnic-based preferences and/or biased matching processes and its effects on network structure. We find that ethnic segregation in social networks (inbreeding homophily) leads to ethnic minorities having smaller, less diversified networks than the Kinh majority. We show that inbreeding homophily is more frequent in Kinh networks than in other groups; and seems to be driven in part by segmentation of social interactions within rural communes. This pattern means that compared to other groups, Kinh could be more efficiently insured against covariant risks as they can rely on larger and more diversified risk-sharing network in terms of member occupation and location. Under this view, inequalities among ethnic groups in Vietnam appear to be partially rooted in the cultural and social distances between them.