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Heterogeneity of Preferences, Limited Commitment and Coalitions: Empirical Evidence on the Limits to Risk Sharing in Rural Paki

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  • Dubois, Pierre

Abstract

In this paper, we study the determinants of the value of informal risk sharing groups. In particular, we look at the effects of heterogeneity of preferences and of limited commitment constraints that restrict feasible allocations differently if individuals can deviate form risk sharing agreements in coalitions or not. We test empirically several predictable implications in rural Pakistan taking into account the heterogeneity of households' preferences. Our results show that exogenous size of risk sharing groups can be rejected or that only imperfect risk sharing is obtained within the village because of limited commitment and because of the risk of coalition formation that needs to be deterred.

Suggested Citation

  • Dubois, Pierre, 2006. "Heterogeneity of Preferences, Limited Commitment and Coalitions: Empirical Evidence on the Limits to Risk Sharing in Rural Paki," CEPR Discussion Papers 6004, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:6004
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    Cited by:

    1. Jaramillo, Fernando & Kempf, Hubert & Moizeau, Fabien, 2015. "Heterogeneity and the formation of risk-sharing coalitions," Journal of Development Economics, Elsevier, vol. 114(C), pages 79-96.
    2. Emla Fitzsimons & Bansi Malde & Marcos Vera‐Hernández, 2018. "Group Size and the Efficiency of Informal Risk Sharing," Economic Journal, Royal Economic Society, vol. 128(612), pages 575-608, July.
    3. Tessa Bold & Tobias Broer, 2021. "Risk Sharing in Village Economies Revisited [Efficient Risk Sharing with Limited Commitment and Storage]," Journal of the European Economic Association, European Economic Association, vol. 19(6), pages 3207-3248.
    4. Tobias Broer & Tessa Bold, 2015. "Risk-Sharing in Village Economies Revisited," 2015 Meeting Papers 1232, Society for Economic Dynamics.
    5. Daniel J. Hernandez & Fernando Jaramillo & Hubert Kempf & Fabien Moizeau & Thomas Vendryes, 2023. "Limited Commitment, Social Control and Risk-Sharing Coalitions in Village Economies," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 2023-03, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.

    More about this item

    Keywords

    Coalitions; Insurance; Limited commitment; Pakistan; Risk; Risk aversion;
    All these keywords.

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