Does Finance Make Us Less Social?

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