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Family ties, incentives and development: a model of coerced altruism

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  • Alger, Ingela

    ()
    (Carleton University)

  • Weibull, Jörgen

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

We 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.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 681.

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Length: 32 pages
Date of creation: 24 Oct 2007
Date of revision:
Handle: RePEc:hhs:hastef:0681

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Keywords: altruism; coerced altruism; family ties; insurance; moral hazard;

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References

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Citations

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Cited by:
  1. 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).
  2. Renaud Bourlès & Yann Bramoullé, 2013. "Altruism in Networks," Working Papers halshs-00881451, HAL.
  3. 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.
  4. Ingela Alger & J�rgen W. Weibull, 2010. "Kinship, Incentives, and Evolution," American Economic Review, American Economic Association, vol. 100(4), pages 1725-58, September.
  5. 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.

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