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Limited Insurance Within the Household: Evidence from a Field Experiment in Kenya

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Robinson, Jonathan

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Abstract

This paper presents results from a randomized field experiment to test for the importance of limited commitment (due to incomplete contract enforceability) in explaining intra-household risk sharing arrangements in Kenya. The experiment followed 142 daily income earners and their spouses for 8 weeks. Every week, each individual had a 50% chance of receiving a 150 Kenyan shilling (US $2) income shock (equivalent to about 1.5 days' income for men and 1 week's income for women). This paper has 2 main results. First, since the experimental payments are random, they allow for a direct test of allocative Pareto efficiency. I reject efficiency, as male private goods expenditures are sensitive to the receipt of the payment. Second, the experiment varied the level of intra-household correlation in the experimental payments between couples. I find that women send bigger transfers to their husbands when shocks are independent or negatively correlated, a result consistent with the presence of limited commitment. I find no difference in transfers for men, likely because the shocks were too small to cause the limited commitment constraint to bind for them.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8314.

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Date of creation: 17 Apr 2008
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Handle: RePEc:pra:mprapa:8314

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O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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