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Imperfect Commitment, Altruism, and the Family: Evidence from Transfer Behavior in Low-Income Rural Areas

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  • Mark Rosenzweig
  • Andrew D. Foster

Abstract

In this paper, we examine empirically whether risk pooling is more advantageous among altruistic compared to selfish agents in a framework where individuals cannot make binding commitments. In particular, we incorporate altuism into a model of risk sharing under imperfect commitment and use simulation methods to establish tests of the roles of both altruism and commitment problems in determining the extent of insurance and the intertemporal movements in interhousehold transfers. The tests are carried out using three panel data sets from two countries of rural South Asia that provide detailed information on transfers and enable the measurement of income shocks. The estimates provide strong support for the notion that imperfect commitment substantially constrains informal transfer arrangements, whether kin-based or not, but also provide evidence that altruism plays an important role in ameliorating commitment constraints and thus in increasing the gains from income pooling. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Paper provided by University of Pennsylvania in its series Home Pages with number _075.

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Date of creation: Oct 1995
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Handle: RePEc:wop:pennhp:_075

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  1. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  2. Rosenzweig, Mark R. & Stark, Oded, 1987. "Consumption Smoothing, Migration and Marriage: Evidence from Rural India," Bulletins 7515, University of Minnesota, Economic Development Center.
  3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  4. Rosenzweig, Mark R & Wolpin, Kenneth I, 1994. "Parental and Public Transfers to Young Women and Their Children," American Economic Review, American Economic Association, vol. 84(5), pages 1195-1212, December.
  5. Rosenzweig, Mark R. & Binswanger, Hans P., 1989. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Bulletins 7455, University of Minnesota, Economic Development Center.
  6. Hoff, Karla & Stiglitz, Joseph E., 1997. "Moneylenders and bankers: price-increasing subsidies in a monopolistically competitive market," Journal of Development Economics, Elsevier, vol. 52(2), pages 429-462, April.
  7. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 2000. "Mutual Insurance, Individual Savings and Limited Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(2), pages 216-246, April.
  8. Coate, Stephen, 1995. "Altruism, the Samaritan's Dilemma, and Government Transfer Policy," American Economic Review, American Economic Association, vol. 85(1), pages 46-57, March.
  9. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
  10. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
  11. Jere Behrman & Mark Rosenzweig & Andrew D. Foster, . "Dynamic Savings Decisions in Agricultural Environments with Incomplete Markets," Home Pages _067, University of Pennsylvania.
  12. Ritter, Joseph A & Taylor, Lowell J, 1994. "Workers as Creditors: Performance Bonds and Efficiency Wages," American Economic Review, American Economic Association, vol. 84(3), pages 694-704, June.
  13. Kimball, Miles S, 1988. "Farmers' Cooperatives as Behavior Toward Risk," American Economic Review, American Economic Association, vol. 78(1), pages 224-32, March.
  14. Rogerson, William P, 1985. "Repeated Moral Hazard," Econometrica, Econometric Society, vol. 53(1), pages 69-76, January.
  15. 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.
  16. Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-98, December.
  17. Kletzer, K.M. & Wright, B.D., 1990. "Sovereign Debt Renegotiation In A Consumption-Smoothing Model," Papers 610, Yale - Economic Growth Center.
  18. Udry, Christopher, 1995. "Risk and Saving in Northern Nigeria," American Economic Review, American Economic Association, vol. 85(5), pages 1287-1300, December.
  19. Thomas, Jonathan & Worrall, Tim, 1988. "Self-enforcing Wage Contracts," Review of Economic Studies, Wiley Blackwell, vol. 55(4), pages 541-54, October.
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