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Is a Friend in Need a Friend Indeed? Inclusion and Exclusion in Mutual Insurance Networks in Southern Ghana

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  • Goldstein, Markus
  • de Janvry, Alain
  • Sadoulet, Elisabeth

Abstract

Mutual insurance has been shown, theoretically and empirically, to be incomplete and limited by asymmetric information and lack of enforcement mechanisms. While some research has shown that networks based on kinship, neighborhood and ethnicity may provide a locus of insurance and thus a way of overcoming these problems, these studies are not fine enough to predict the inclusion and exclusion of individuals. Using data from rural Ghana, we examine the role of social relations in obtaining assistance in the face of shocks. We examine this at both the intra-household and community levels. At the household level, asking for and receiving assistance from the spouse is related to gender, the quality of the marital relationship, and the wealth of household members. At the community level, asking for and receiving help are correlated with membership in a major lineage, participation in secular organizations, the individual's fostering history, and anticipated land inheritance. We also show that these factors differ depending on whether the shortfall was for a household or personal item (as perceived by the respondent). This work helps us to identify individuals who are more likely to fall outside of mutual insurance networks and require interventions to help them cope with risk.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2002/dp2002-25.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper DP2002/25.

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Length: 33 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:unu:wpaper:dp2002-25

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Keywords: Risk; Social networks ; Mutual insurance; Intrahousehold allocation;

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References

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  1. Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
  2. de Janvry, Alain & Sadoulet, Elisabeth & Winters, Paul C. & Murgai, Rinku, 2000. "Localized and Incomplete Mutual Insurance," Working Papers 12905, University of New England, School of Economics.
  3. Paul Gertler & Jonathan Gruber, 1997. "Insuring Consumption Against Illness," NBER Working Papers 6035, National Bureau of Economic Research, Inc.
  4. Grimard, Franque, 1997. "Household consumption smoothing through ethnic ties: evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 53(2), pages 391-422, August.
  5. Kimball, Miles S, 1988. "Farmers' Cooperatives as Behavior Toward Risk," American Economic Review, American Economic Association, vol. 78(1), pages 224-32, March.
  6. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  7. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
  8. Deaton, Angus, 1992. " Household Saving in LDCs: Credit Markets, Insurance and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(2), pages 253-73.
  9. Ligon, Ethan, 1998. "Risk Sharing and Information in Village Economics," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 847-64, October.
  10. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  11. Marcel Fafchamps & Susan Lund, . "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
  12. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
  13. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-74, October.
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Cited by:
  1. repec:hal:wpaper:halshs-00585968 is not listed on IDEAS
  2. Isabel Fischer & Tina Beuchelt & Tom Dufhues & Gertrud Buchenrieder, 2010. "Risk management networks of ethnic minorities in Viet Nam," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 17(2), pages 83-118, December.

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