Roscas as Financial Agreements to Cope with Social Pressure
AbstractIn developing countries, traditional social obligations often press rich individuals to share their income. In this paper, we posit a "model of social pressure" in which people can sign binding financial agreements amongst themselves, thereby forming coalitions. These financial agreements may help them to alleviate their social obligations with respect to income sharing. In the above context, we show that there exists a stable structure of coalitions in which people form rotating savings and credit associations (roscas). We therefore provide a rationale for one of the most prevalent and puzzling financial institutions.
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Bibliographic InfoPaper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 103.
Date of creation: 01 Jun 2003
Date of revision:
Publication status: Published in Journal of Development Economics 2007, vol. 82, pages 120-137
Roscas; Social pressure; Stability; Contract; Credit;
Other versions of this item:
- Ambec, S. & Treich, N., 2003. "Roscas as financial agreements to cope with social pressure," Working Papers 200301, Grenoble Applied Economics Laboratory (GAEL).
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- G29 - Financial Economics - - Financial Institutions and Services - - - Other
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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