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Fraying of the Ties that Bind: HIV/AIDS and Informal Contract Enforcement in KwaZulu Natal, South Africa

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  • Linkow, Benjamin

Abstract

This paper provides a theoretical and empirical investigation of the effects of HIV/AIDS on communitylevel informal financial institutions such as rotating savings and credit associations. Our theoretical model illustrates that the mortality risk implied by the HIV/AIDS pandemic can put a significant strain on such institutions by shortening time horizons and weakening expectations of reciprocity on the part of participants. Mortality thus implies a community-wide externality, as even households that are not directly impacted by the disease are nonetheless adversely affected by living in high prevalence communities. Using panel data from the high-prevalence area of KwaZulu Natal, South Africa, we investigate the effects of community-level mortality on the rate of participation in community level financial and other types of groups. We find that mortality at the community level substantially reduces the prevalence of group membership, and that the differential impacts of mortality on different types of groups are consistent with the predictions of our theoretical model.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21769.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:21769

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Related research

Keywords: HIV/AIDS; South Africa; Institutions; ROSCAs;

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  1. Anne Case & Anu Garrib & Alicia Menendez & Analia Olgiati, 2008. "Paying the Piper: The High Cost of Funerals in South Africa," NBER Working Papers 14456, National Bureau of Economic Research, Inc.
  2. Anderson, Siwan & Baland, Jean-Marie & Moene, Karl Ove, 2009. "Enforcement in informal saving groups," Journal of Development Economics, Elsevier, vol. 90(1), pages 14-23, September.
  3. Siwan Anderson, 2000. "The Economics of Roscas and Intra-Household Resource Allocation," Econometric Society World Congress 2000 Contributed Papers 1323, Econometric Society.
  4. Suneetha Kadiyala & Stuart Gillespie, 2006. "Community-level Impacts of AIDS-Related Mortality: Panel Survey Evidence from Zambia ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(3), pages 440-457.
  5. David, Antonio C., 2007. "HIV/AIDS and social capital in a cross-section of countries," Policy Research Working Paper Series 4263, The World Bank.
  6. Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
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