Roscas as financial agreements to cope with social pressure
AbstractIn developing countries, traditional social obligations often press rich individuals to share their income. In this paper, we posit a "model of social pressure" in which people can sign binding financial agreements amongst themselves, thereby forming coalitions. These financial agreements may help them to alleviate their social obligations with respect to income sharing. In the above context, we show that there exists a stable structure of coalitions in which people form rotating savings and credit associations (roscas). We therefore provide a rationale for one of the most prevalent and puzzling financial institutions.
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Bibliographic InfoPaper provided by Grenoble Applied Economics Laboratory (GAEL) in its series Working Papers with number 200301.
Date of creation: 2003
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ROSCA; SOCIAL PRESSURE; STABILITY; CONTRACT; CREDIT;
Other versions of this item:
- Stefan Ambec & Nicolas Treich, 2003. "Roscas as Financial Agreements to Cope with Social Pressure," CSEF Working Papers 103, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
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