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Formal Insurance and the Dynamics of Social Capital: Experimental Evidence from Uganda

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  • Francesco Cecchi
  • Jan Duchoslav
  • Erwin Bulte

Abstract

We explore how the introduction of formal insurance affects the within-village dynamics of social capital in south-western Uganda. As a proxy for social capital, we use contributions in a public goods game. Consistent with existing evidence, our data suggest formal insurance crowds out social capital. However, and surprisingly, overall contributions to the common pot do not go down because insurance adopters reduce their contributions. Instead, social capital erodes because the uninsured, or the local poor, lower their contributions. We discuss what might explain this finding.

Suggested Citation

  • Francesco Cecchi & Jan Duchoslav & Erwin Bulte, 2016. "Formal Insurance and the Dynamics of Social Capital: Experimental Evidence from Uganda," Journal of African Economies, Centre for the Study of African Economies, vol. 25(3), pages 418-438.
    • Handle: RePEc:oup:jafrec:v:25:y:2016:i:3:p:418-438.
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    File URL: http://hdl.handle.net/10.1093/jae/ejw002
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    Cited by:

    1. Nikolov, Plamen & Bonci, Matthew, 2020. "Do public program benefits crowd out private transfers in developing countries? A critical review of recent evidence," World Development, Elsevier, vol. 134(C).
    2. Nathaniel Jensen & Jose Lopez-Rivas & Karlijn Morsink & Emma Rikken, 2025. "Weathering Conflict: The Effect of Resource Shocks on Livestock Raids," CSAE Working Paper Series 2025-02, Centre for the Study of African Economies, University of Oxford.
    3. Stefano Caria & Simon Franklin & Marc Witte, 2023. "Searching with Friends," Journal of Labor Economics, University of Chicago Press, vol. 41(4), pages 887-922.
    4. Murphy, David M.A., 2023. "Sobriety, social capital, and village network structures," World Development, Elsevier, vol. 166(C).
    5. Barsbai, Toman & Licuanan, Victoria & Steinmayr, Andreas & Tiongson, Erwin & Yang, Dean, 2024. "Information and immigrant settlement," Journal of Development Economics, Elsevier, vol. 170(C).
    6. Stoeffler, Quentin & Opuz, Gülce, 2022. "Price, information and product quality: Explaining index insurance demand in Burkina Faso," Food Policy, Elsevier, vol. 108(C).
    7. Temesgen Belissa & Robert Lensink & Anne Winkel, 2020. "Effects of Index Insurance on Demand and Supply of Credit: Evidence from Ethiopia," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(5), pages 1511-1531, October.
    8. Putman, Daniel S., 2020. "The Scope of Risk Pooling," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304480, Agricultural and Applied Economics Association.
    9. Meike Will & Jürgen Groeneveld & Karin Frank & Birgit Müller, 2021. "Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-18, March.
    10. Grimm, Michael & Hartwig, Renate & Reitmann, Ann-Kristin & Bocoum, Fadima Yaya, 2021. "Inter-household transfers: An empirical investigation of the income-transfer relationship with novel data from Burkina Faso," World Development, Elsevier, vol. 144(C).
    11. Toman Barsbai & Victoria Licuanan & Andreas Steinmayr & Erwin Tiongson & Dean Yang, 2020. "Information and the Acquisition of Social Network Connections," NBER Working Papers 27346, National Bureau of Economic Research, Inc.
    12. Lin, Wanchuan & Meng, Juanjuan & Weng, Xi, 2020. "Formal insurance and informal risk sharing dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 837-863.
    13. Abay, Kibrom A. & Nigus, Halefom Yigzaw, 2024. "Cooperation among community leaders: The role of women’s leadership and exposure to conflict," IFPRI discussion papers 2273, International Food Policy Research Institute (IFPRI).
    14. Halefom Yigzaw Nigus & Eleonora Nillesen & Pierre Mohnen, 2024. "The effect of weather index insurance on social capital: Evidence from rural Ethiopia," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 91(1), pages 121-159, March.
    15. Gebrekidan, Tnsue, 2021. "Effect of Index-Based Livestock Insurance on Uninsured Poultry Production: Experimental Evidence from Southern Ethiopia," 2021 Conference, August 17-31, 2021, Virtual 315847, International Association of Agricultural Economists.
    16. Nigus, Halefom & Nillesen, Eleonora & Mohnen, Pierre, 2018. "The effect of weather index insurance on social capital: Experimental evidence from Ethiopia," MERIT Working Papers 2018-007, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    17. Strupat, Christoph & Klohn, Florian, 2018. "Crowding out of solidarity? Public health insurance versus informal transfer networks in Ghana," World Development, Elsevier, vol. 104(C), pages 212-221.
    18. Hanna Freudenreich & Marcela Ibanez & Stephan Dietrich & Oliver Musshoff, 2018. "Formal insurance, risk sharing, and the dynamics of other-regarding preferences," Department of Agricultural and Rural Development (DARE) Discussion Papers 266532, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    19. Christoph Strupat, 2022. "Social Protection and Social Cohesion in Times of the COVID-19 Pandemic: Evidence from Kenya," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 34(3), pages 1320-1357, June.

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