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Inequality and Group Participation: Theory and Evidence from Rural Tanzania

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Eliana La Ferrara

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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 effect 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 effect 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 decreases participation in open access groups when there are wide disparities at the bottom of the distribution, while it increases participation in restricted access groups when the disparities are around the middle and top part of the distribution. Finally we assess the impact of inequality on various dimensions of group functioning.

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Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 161.

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Handle: RePEc:igi:igierp:161

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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.:
  1. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December. [Downloadable!] (restricted)
  2. Alberto Alesina & Eliana La Ferrara, 2000. "Participation In Heterogeneous Communities," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 847-904, August. [Downloadable!] (restricted)
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  3. Isham, Jonathan & Narayan, Deepa & Pritchett, Lant, 1995. "Does Participation Improve Performance? Establishing Causality with Subjective Data," World Bank Economic Review, Oxford University Press, vol. 9(2), pages 175-200, May.
  4. Sendhil Mullainathan & Marianne Bertrand & Erzo F.P. Luttmer, 1998. "Network Effects and Welfare Cultures," Working papers 98-21, Massachusetts Institute of Technology (MIT), Department of Economics.
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  5. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 393-413, April.
  6. 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. [Downloadable!] (restricted)
  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.
  8. 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. [Downloadable!] (restricted)
  9. Anne C. Case & Lawrence F. Katz, 1991. "The Company You Keep: The Effects of Family and Neighborhood on Disad- vantaged Youths," NBER Working Papers 3705, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March. [Downloadable!] (restricted)
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  11. 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. [Downloadable!]
  12. 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. [Downloadable!]
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  13. Epple, Dennis & Romer, Thomas, 1991. "Mobility and Redistribution," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 828-58, August. [Downloadable!] (restricted)
  14. Kevin Roberts, 1999. "Dynamic Voting in Clubs," STICERD - Theoretical Economics Paper Series 367, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE. [Downloadable!]
  15. Bergstrom, Theodore & Blume, Lawrence & Varian, Hal, 1986. "On the private provision of public goods," Journal of Public Economics, Elsevier, vol. 29(1), pages 25-49, February. [Downloadable!] (restricted)
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  16. Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Haddad, Lawrence James & Maluccio, John A., 2002. "Trust, membership in groups, and household welfare," FCND discussion papers 135, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  2. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust in Sweden: Some Inequalities are More Harmful than Others," Ratio Working Papers 106, The Ratio Institute. [Downloadable!]
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  3. Serguei Kaniovski & Dennis C. Mueller, . "Community Size, Heterogeneity and Voter Turnouts," WIFO Working Papers 248, WIFO. [Downloadable!]
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  4. Juan Camilo Cardenas, 2002. "Real Wealth and Experimental Cooperation: Evidence from Field Experiments," Artefactual Field Experiments 0017, The Field Experiments Website. [Downloadable!]
  5. Daniel Haile & Abdolkarim Sadrieh & Harrie A. A Verbon, 2006. "Cross-Racial Envy and Underinvestment in South Africa," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  6. Kaivan Munshi & Mark Rosenzweig, 2009. "Why is Mobility in India so Low? Social Insurance, Inequality, and Growth," NBER Working Papers 14850, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Alberto Alesina & Eliana La Ferrara, 1999. "Participation in Heterogeneous Communities," NBER Working Papers 7155, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Besley, Timothy J. & Burgess, Robin, 2001. "The Political Economy of Government Responsiveness: Theory and Evidence from India," CEPR Discussion Papers 2721, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Orana Bandiera & Iwan Barankay & Imran Rasul, 2005. "Cooperation in Collective Action," Natural Field Experiments 0013, The Field Experiments Website. [Downloadable!]
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  10. I Jones & C.M Nyland & M.G Pollitt, 2001. "How do Multinationals Build Social Capital? Evidence from South Africa," ESRC Centre for Business Research - Working Papers wp220, ESRC Centre for Business Research. [Downloadable!]
  11. David Dreyer Lassen & Helene Bie Lilleør, 2008. "Informal Institutions and Intergenerational Contracts: Evidence from Schooling and Remittances in Rural Tanzania," CAM Working Papers 2008-03, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
  12. Alberto Alesina & Eliana La Ferrara, 2004. "Ethnic Diversity and Economic Performance," NBER Working Papers 10313, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Sirisha C. Naidu, 2005. "Heterogeneity and Common Pool Resources: Collective Management of Forests in Himachal Pradesh, India," Working Papers 2005-8, University of Massachusetts Amherst, Department of Resource Economics. [Downloadable!]
    Other versions:
  14. Lall, Somik V. & Deichmann, Uwe & Lundberg, Mattias K.A. & Chaudhury, Nazmul, 2002. "Tenure, Divesity, and commitment - community participation for urban service provision," Policy Research Working Paper Series 2862, The World Bank. [Downloadable!]
    Other versions:
  15. Galasso, Emanuela & Ravallion, Martin, 2000. "Distributional outcomes of a decentralized welfare program," Policy Research Working Paper Series 2316, The World Bank. [Downloadable!]
  16. Gustavsson, Magnus & Jordahl, Henrik, 2006. "Inequality and Trust: Some Inequalities are More Harmful than Others," Working Paper Series 2006:3, Uppsala University, Department of Economics. [Downloadable!]
  17. Nancy Birdsall, 2007. "Income Distribution: Effects on Growth and Development," Working Papers 118, Center for Global Development. [Downloadable!]
  18. Aleksynska, Mariya, 2007. "Attitudes Towards Immigrants and Relative Deprivation: The Case of a Middle-Income Country," MPRA Paper 4595, University Library of Munich, Germany. [Downloadable!]
  19. Raghbendra Jha & Sambit Bhattacharyya & Raghav Gaiha & Shylashri Shankar, 2008. "Capture of Anti-Poverty Programs: An Analysis of the National Rural Employment Guarantee Program in India," ASARC Working Papers 2008-07, Australian National University, Australia South Asia Research Centre. [Downloadable!]
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  20. Aleksynska, Mariya, 2007. "Civic Participation of Immigrants: Culture Transmission and Assimilation," MPRA Paper 4594, University Library of Munich, Germany. [Downloadable!]
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