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Social norms and individual savings in the context of informal insurance

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  • Wahhaj, Zaki

Abstract

Abstract This paper develops a theory of informal insurance in the presence of an intertemporal technology. It is shown that when an insurance agreement suffers from enforcement problems, constraints on individual savings behaviour can enable the group to sustain greater cooperation. This result provides a motivation for a variety of social norms observed in traditional societies which discourage 'excessive' accumulation of wealth by individuals. The paper also shows that social norms that discourage savings are more likely to benefit poorer communities and thus, paradoxically, cause them to fall further behind even as it serves a useful purpose.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 76 (2010)
Issue (Month): 3 (December)
Pages: 511-530

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Handle: RePEc:eee:jeborg:v:76:y:2010:i:3:p:511-530

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Web page: http://www.elsevier.com/locate/jebo

Related research

Keywords: Informal insurance Social norms Savings behaviour Culture and economic development;

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References

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  1. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 209-244.
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  17. Besley, Timothy, 1995. "Savings, credit and insurance," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 36, pages 2123-2207 Elsevier.
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Cited by:
  1. Sarmistha Pal & Zaki Wahhaj, 2012. "Fiscal Decentralisation, Local Institutions and Public Goods Provision: Evidence from Indonesia," Studies in Economics 1216, Department of Economics, University of Kent.

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