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Inequality and group participation: theory and evidence from rural Tanzania

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  • La Ferrara, Eliana

Abstract

This paper investigates the determinants of group membership, and in particular the effect of income inequality on individual incentives to join economic groups. Drawing on a simple model, we show that an increase in inequality has an ambiguous effect and that the type of access rule (open versus restricted access) is key in determining what income categories are represented in the group. Furthermore, the shape of the income distribution can be crucial to determine whether increased inequality leads to more or less group participation. Using survey data from rural Tanzania we find that inequality at the village level has a negative impact on the likelihood that the respondents are members of any group. This effect is particularly significant for relatively wealthier people, both when relative wealth is 'objectively' measured, and when it is 'subjectively' defined. However, when we disaggregate groups by type of access rule, we find that inequality decreases participation in open access groups when there are wide disparities at the bottom of the distribution, while it increases participation in restricted access groups when the disparities are around the middle and top part of the distribution. Finally, we assess the impact of inequality on various dimensions of group functioning.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 85 (2002)
Issue (Month): 2 (August)
Pages: 235-273

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Handle: RePEc:eee:pubeco:v:85:y:2002:i:2:p:235-273

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Web page: http://www.elsevier.com/locate/inca/505578

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  1. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 393-413, April.
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  12. Eliana La Ferrara, . "Ethnicity and Reciprocity: A model of Credit Transactions in Ghana," Working Papers 193, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  13. Alberto Alesina & Eliana La Ferrara, . "Participation in Heterogeneous Communities," Working Papers 151, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  14. Isham, Jonathan & Narayan, Deepa & Pritchett, Lant, 1995. "Does Participation Improve Performance? Establishing Causality with Subjective Data," World Bank Economic Review, World Bank Group, vol. 9(2), pages 175-200, May.
  15. Anne C. Case & Lawrence F. Katz, 1991. "The Company You Keep: The Effects of Family and Neighborhood on Disadvantaged Youths," NBER Working Papers 3705, National Bureau of Economic Research, Inc.
  16. Gaspart, Frederic, et al, 1998. "Participation in the Construction of a Local Public Good with Indivisibilities: An Application to Watershed Development in Ethiopia," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 7(2), pages 157-84, July.
  17. Fernandez, Raquel & Rogerson, Richard, 1996. "Income Distribution, Communities, and the Quality of Public Education," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 135-64, February.
  18. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  19. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February.
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