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Inequality and Group Participation: Theory and Evidence from Rural Tanzania

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  • Eliana La Ferrara

    (Bocconi University; IGIER)

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 e¤ect 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 e¤ect 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 can have a positive impact on participation, depending on the shape of the income distribution. Finally, we assess the impact of inequality on various dimensions of group functioning.

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Bibliographic Info

Paper provided by Centro Studi Luca d\'Agliano, University of Milano in its series Development Working Papers with number 138.

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Date of creation: 01 Jun 2000
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Handle: RePEc:csl:devewp:138

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  1. Marianne Bertrand & Erzo F. P. Luttmer & Sendhil Mullainathan, 1999. "Network Effects and Welfare Cultures," Working Papers 9903, Harris School of Public Policy Studies, University of Chicago.
  2. 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.
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  4. Kevin Roberts, 1999. "Dynamic Voting in Clubs," STICERD - Theoretical Economics Paper Series 367, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  5. La Ferrara, Eliana & Alesina, Alberto, 2000. "Participation in Heterogeneous Communities," Scholarly Articles 4551796, Harvard University Department of Economics.
  6. Pranab Bardhan and Maitreesh Ghatak., 1999. "Inequality, Market Imperfections, and Collective Action Problems," Center for International and Development Economics Research (CIDER) Working Papers C99-108, University of California at Berkeley.
  7. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
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  9. Baland, Jean-Marie & Platteau, Jean-Philippe, 1997. "Wealth Inequality and Efficiency in the Commons: Part I: The Unregulated Case," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 451-82, October.
  10. Narayan, Deepa & Pritchett, Lant, 1997. "Cents and sociability : household income and social capital in rural Tanzania," Policy Research Working Paper Series 1796, The World Bank.
  11. Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank.
  12. Alberto Alesina & Eliana La Ferrara, 1999. "Participation in Heterogeneous Communities," NBER Working Papers 7155, National Bureau of Economic Research, Inc.
  13. Denise DiPasquale & Edward L. Glaeser, 1998. "Incentives and Social Capital: Are Homeowners Better Citizens?," NBER Working Papers 6363, National Bureau of Economic Research, Inc.
  14. 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.
  15. 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.
  16. 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.
  17. 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.
  18. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August.
  19. 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.
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