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Are Gifts and Loans between Households Voluntary?

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  • Marcel Fafchamps
  • Margherita Comola

Abstract

Using village data from Tanzania, we test whether gifts and loans between households are voluntary while correcting for mis-reporting by the giving and receiving households.� Two maintained assumptions underlie our analysis: answers to a question on who people would turn to for help are good proxies for willingness to link; and, conditional on regressors, the probability of reporting a gift or loan is independent between giving and receiving households.� Building on these assumptions, we develop a new estimation methodology that corrects for response bias.� Our testing strategy is based on the idea that, if lending and gift giving are voluntary, then both households should want to rely on each other for help.� We find only weak evidence to support bilateral link formation.� We do, however, find reasonably strong evidence to support unilateral link formation.� Results suggest that if�a household wishes to enter in a reciprocal relationship with someone who is sufficiently close socially and geographically, it can do so unilaterally.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number CSAE WPS/2010-20.

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Date of creation: 01 Jun 2010
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Handle: RePEc:oxf:wpaper:csae-wps/2010-20

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Related research

Keywords: Risk sharing; reporting bias; social networks;

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References

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  1. Stefan Dercon & Joachim de Weerdt, 2004. "Risk-Sharing Networks And Insurance Against Illness," Development and Comp Systems 0409019, EconWPA.
  2. Margherita Comola & Marcel Fafchamps, 2009. "Testing unilateral and bilateral link formation," PSE Working Papers halshs-00574971, HAL.
  3. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
  4. Siwan Anderson, 2000. "The Economics of Roscas and Intra-Household Resource Allocation," Econometric Society World Congress 2000 Contributed Papers 1323, Econometric Society.
  5. Mark Rosenzweig & Andrew D. Foster, 1995. "Imperfect Commitment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas," Home Pages _075, University of Pennsylvania.
  6. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
  7. repec:pse:psecon:2009-30 is not listed on IDEAS
  8. Hayami, Y & Platteau, J-P, 1997. "Resource Endowments and Agricultural Development : Africa vs. Asia," Papers, Notre-Dame de la Paix, Sciences Economiques et Sociales 192, Notre-Dame de la Paix, Sciences Economiques et Sociales.
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Cited by:
  1. Nordman, Christophe Jalil & Vaillant, Julia, 2014. "Inputs, Gender Roles or Sharing Norms? Assessing the Gender Performance Gap Among Informal Entrepreneurs in Madagascar," IZA Discussion Papers 8046, Institute for the Study of Labor (IZA).
  2. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2011. "Saving, Microinsurance: Why You Should Do Both or Nothing. A Behavioral Experiment on the Philippines," Proceedings of the German Development Economics Conference, Berlin 2011 51, Verein für Socialpolitik, Research Committee Development Economics.
  3. Jakiela, Pamela & Ozier, Owen, 2012. "Does Africa need a rotten Kin Theorem ? experimental evidence from village economies," Policy Research Working Paper Series 6085, The World Bank.
  4. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2012. "Insurance versus Savings for the Poor: Why One Should Offer Either Both or None," IZA Discussion Papers 6298, Institute for the Study of Labor (IZA).

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