IDEAS home Printed from
   My bibliography  Save this article

On attenuation of moral hazard in risk sharing in poor urban economies


  • Eskander Alvi
  • Seife Dendir


This paper examines how risk sharing is shaped by moral hazard and enforcement concerns. The existing literature mostly looks at each concern in isolation and misses out on an interesting tradeoff between insurance and production (effort) that is introduced by jointly incorporating moral hazard and enforcement problems. We show that self-enforcement of contracts requires reduced insurance which in turn softens the moral hazard stance, thereby enhancing effort. Households therefore work harder and produce more output, though they are less insured. This offers an explanation of why informal risk sharing persists despite potentially significant monitoring and enforcement difficulties.

Suggested Citation

  • Eskander Alvi & Seife Dendir, 2008. "On attenuation of moral hazard in risk sharing in poor urban economies," International Economic Journal, Taylor & Francis Journals, vol. 22(4), pages 431-444.
  • Handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:431-444
    DOI: 10.1080/10168730802497429

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    1. Douglas Miller & Anna Paulson, 2000. "Informal Insurance and Moral Hazard: Gambling and Remittances in Thailand," Econometric Society World Congress 2000 Contributed Papers 1463, Econometric Society.
    Full references (including those not matched with items on IDEAS)


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:22:y:2008:i:4:p:431-444. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.