Family ties, incentives and development: a model of coerced altruism
AbstractWe analyze the effects of family ties on the incentives for production of effort, where family ties are defined as a mixture of true and coerced altruism between family members. We model families as pairs of siblings. Each sibling exerts effort in order to obtain output under uncertainty. A social norm dictates that a sibling with a high output must share a specified amount of this output with his sibling, if the latter's output is low. Siblings may be truly altruistic towards each other, but not to a larger degree than dictated by the social norm. We compare such informal family insurance with actuarially fair formal insurance. We show that coerced family altruism reduces individual efforts in equilibrium. However, individuals always benefit ex ante from living in families with coerced altruism, as compared with living in autarky. We show that a certain degree of coerced family altruism is robust as a social norm in a society of selfish individuals. Finally, we show that if family members are sufficiently altruistic to each other, then informal family insurance by way of coerced altruism may outperform actuarially fair insurance programs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 681.
Length: 32 pages
Date of creation: 24 Oct 2007
Date of revision:
Contact details of provider:
Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
Web page: http://www.hhs.se/
More information through EDIRC
altruism; coerced altruism; family ties; insurance; moral hazard;
Other versions of this item:
- Ingela Alger & Jörgen W. Weibull, 2007. "Family ties, incentives and development: A model of coerced altruism," Carleton Economic Papers 07-10, Carleton University, Department of Economics, revised 2008.
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-15 (All new papers)
- NEP-CBE-2007-12-15 (Cognitive & Behavioural Economics)
- NEP-EVO-2007-12-15 (Evolutionary Economics)
- NEP-IAS-2007-12-15 (Insurance Economics)
- NEP-SOC-2007-12-15 (Social Norms & Social Capital)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wolff, Francois-Charles, 2006. "Microeconomic models of family transfers," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
- 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.
- Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 209-44, January.
- Bennardo, Alberto & Chiappori, Pierre-André, 2002.
"Bertrand and Walras Equilibria Under Moral Hazard,"
CEPR Discussion Papers
3650, C.E.P.R. Discussion Papers.
- Alberto Bennardo & P.A. Chiappori, 2002. "Bertrand and Walras equilibria under moral hazard," CSEF Working Papers 87, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
- Alberto Bennardo & Pierre-Andre Chiappori, 2003. "Bertrand and Walras Equilibria Under Moral Hazard," Levine's Working Paper Archive 618897000000000748, David K. Levine.
- Yann Bramoullé & Rachel Kranon, 2005.
Cahiers de recherche
- Garance Genicot & Debraj Ray, 2003.
"Group Formation in Risk--Sharing Arrangements,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(1), pages 87-113, January.
- Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-90, March.
- Arnott, Richard J & Stiglitz, Joseph E, 1988.
" The Basic Analytics of Moral Hazard,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 90(3), pages 383-413.
- Townsend, Robert M, 1994.
"Risk and Insurance in Village India,"
Econometric Society, vol. 62(3), pages 539-91, May.
- Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
- Robert M. Townsend, . "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
- Posner, Richard A, 1980.
"A Theory of Primitive Society, with Special Reference to Law,"
Journal of Law and Economics,
University of Chicago Press, vol. 23(1), pages 1-53, April.
- Richard A. Posner, 1979. "A Theory of Primitive Society with Special Reference to Law," University of Chicago - George G. Stigler Center for Study of Economy and State 7, Chicago - Center for Study of Economy and State.
- Alberto Alesina & Paola Giuliano, 2010.
"The power of the family,"
Journal of Economic Growth,
Springer, vol. 15(2), pages 93-125, June.
- Jean-Paul Azam & Flore Gubert, 2002.
"Those in Kayes. The impact of remittances on their recipients in Africa,"
DT/2002/11, DIAL (Développement, Institutions et Mondialisation).
- Jean-Paul Azam & Flore Gubert, 2005. "Those in Kayes. The Impact of Remittances on Their Recipients in Africa," Revue économique, Presses de Sciences-Po, vol. 56(6), pages 1331-1358.
- Azam, Jean-Paul & Gubert, Flore, 2004. "Those in Kayes: The Impact of Remittances on their Recipients in Africa," IDEI Working Papers 308, Institut d'Économie Industrielle (IDEI), Toulouse.
- Azam, Jean-Paul & Gubert, Flore, 2005. "Those in Kayes. The impact of remittances on the recipients in Africa," Economics Papers from University Paris Dauphine 123456789/4571, Paris Dauphine University.
- Benoit Dostie & Désiré Vencatachellum, 2004. "Compulsory and Voluntary Remittances: Evidence from Child Domestic Workers in Tunisia," Cahiers de recherche 04-04, HEC Montréal, Institut d'économie appliquée.
- Donald Cox & Emanuela Galasso & Emmauel Jiminez, 2006. "Private Transfers in a Cross Section of Developing Countries," Working Papers, Center for Retirement Research at Boston College wp2006-1, Center for Retirement Research, revised Jan 2006.
- Lindbeck, Assar & Weibull, Jorgen W, 1988. "Altruism and Time Consistency: The Economics of Fait Accompli," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1165-82, December.
- Beatriz Armendariz & Jonathan Morduch, 2007. "The Economics of Microfinance," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262512017, December.
- Ingela Alger & Jörgen Weibull, 2008.
"The fetters of the sib: Weber meets Darwin,"
- Cox, Donald & Jimenez, Emmanuel, 1990. "Achieving Social Objectives through Private Transfers: A Review," World Bank Research Observer, World Bank Group, vol. 5(2), pages 205-18, July.
- Mark Rosenzweig & Andrew D. Foster, 1995.
"Imperfect Commitment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas,"
_075, University of Pennsylvania.
- Andrew D. Foster & Mark R. Rosenzweig, 2001. "Imperfect Commitment, Altruism, And The Family: Evidence From Transfer Behavior In Low-Income Rural Areas," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 389-407, August.
- Richard Arnott & Joseph Stiglitz, 1986.
"The Welfare Economics of Moral Hazard,"
635, Queen's University, Department of Economics.
- Helpman, Elhanan & Laffont, Jean-Jacques, 1975. "On moral hazard in general equilibrium theory," Journal of Economic Theory, Elsevier, vol. 10(1), pages 8-23, February.
- Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
- Becker, Gary S, 1974.
"A Theory of Social Interactions,"
Journal of Political Economy,
University of Chicago Press, vol. 82(6), pages 1063-93, Nov.-Dec..
- Douglas Miller & Anna Paulson, 2000. "Informal Insurance and Moral Hazard: Gambling and Remittances in Thailand," Econometric Society World Congress 2000 Contributed Papers 1463, Econometric Society.
- Grimm, Michael & Hartwig, Renate & Lay, Jann, 2013. "Does Forced Solidarity Hamper Investment in Small and Micro Enterprises?," IZA Discussion Papers 7229, Institute for the Study of Labor (IZA).
- Renaud Bourlès & Yann Bramoullé, 2013.
"Altruism in Networks,"
- Ingela Alger & Jörgen W. Weibul, 2007. "Kinship, Incentives and Evolution – revised version: Kinship, Incentives, and Evolution," Carleton Economic Papers 07-13, Carleton University, Department of Economics, revised 17 Sep 2010.
- Ingela Alger & J�rgen W. Weibull, 2010.
"Kinship, Incentives, and Evolution,"
American Economic Review,
American Economic Association, vol. 100(4), pages 1725-58, September.
- Alger, Ingela & Weibull, Jörgen, 2007.
"The Fetters of the Sib: Weber Meets Darwin,"
Working Paper Series in Economics and Finance
682, Stockholm School of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Lundin).
If references are entirely missing, you can add them using this form.