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Gift-Giving, Quasi-Credit and Reciprocity

Author

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  • Jonathan P. Thomas
  • Tim Worrall

Abstract

The fluctuations in incomes inherent in rural communities can be attenuated by reciprocal insurance. We develop a model of such insurance based on self-interested behaviour and voluntary participation. One individual assists another only if the costs of so doing are outweighed by the benefits from expected future reciprocation. A distinction is made between general reciprocity where the counter obligation is expected but not certain and balanced reciprocity where there is a firm counter obligation. This firm counter obligation is reflected by including a loan or quasi-credit element in any assistance. It is shown how this can increase the insurance provided and how it may explain the widespread use of quasi-credit in rural communities. Moreover it is shown that for a range of parameter values consistent with evidence from three villages in southern India, a simple scheme of gift-giving and quasi-credit can do almost as well as theoretically better but more complicated schemes.

Suggested Citation

  • Jonathan P. Thomas & Tim Worrall, 2002. "Gift-Giving, Quasi-Credit and Reciprocity," CESifo Working Paper Series 687, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_687
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp687.pdf
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    References listed on IDEAS

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    1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, pages 539-591.
    2. Besley, Timothy & Coate, Stephen & Loury, Glenn, 1993. "The Economics of Rotating Savings and Credit Associations," American Economic Review, American Economic Association, pages 792-810.
    3. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    4. Andrew D. Foster & Mark R. Rosenzweig, 2001. "Imperfect Commitment, Altruism, And The Family: Evidence From Transfer Behavior In Low-Income Rural Areas," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 389-407, August.
    5. Telser, L G, 1980. "A Theory of Self-enforcing Agreements," The Journal of Business, University of Chicago Press, vol. 53(1), pages 27-44, January.
    6. Kimball, Miles S, 1988. "Farmers' Cooperatives as Behavior Toward Risk," American Economic Review, American Economic Association, vol. 78(1), pages 224-232, March.
    7. Christopher Udry, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 495-526.
    8. Ruffle, Bradley J., 1999. "Gift giving with emotions," Journal of Economic Behavior & Organization, Elsevier, vol. 39(4), pages 399-420, July.
    9. Posner, Richard A, 1980. "A Theory of Primitive Society, with Special Reference to Law," Journal of Law and Economics, University of Chicago Press, vol. 23(1), pages 1-53, April.
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    Cited by:

    1. Odedokun, Matthew, 2003. "Economics and Politics of Official Loans versus Grants Panoramic Issues and Empirical Evidence," WIDER Working Paper Series 004, World Institute for Development Economic Research (UNU-WIDER).
    2. Garance Genicot, Georgetown University and Debraj Ray, New York University and Instituto de An´alisis Econ´omico (CSIC), 2004. "Informal Insurance, Enforcement Constraints, and Group Formation," Working Papers gueconwpa~04-04-03, Georgetown University, Department of Economics.
    3. Greig, Fiona & Bohnet, Iris, 2005. "Is There Reciprocity in a Reciprocal Exchange Economy? Evidence from a Slum in Nairobi, Kenya," Working Paper Series rwp05-044, Harvard University, John F. Kennedy School of Government.
    4. Stig S. Gezelius, 2017. "Considerate Exchange: Exploring Social Exchange on Family Farms," Journal of Family and Economic Issues, Springer, vol. 38(1), pages 18-32, March.
    5. DELPIERRE Matthieu & VERHEYDEN Bertrand & WEYNANTS Stéphanie, 2011. "On the interaction between risk-taking and risk-sharing under farm household wealth heterogeneity," LISER Working Paper Series 2011-35, LISER.
    6. Krishnamurthy, Sandeep & Tripathi, Arvind K., 2009. "Monetary donations to an open source software platform," Research Policy, Elsevier, vol. 38(2), pages 404-414, March.
    7. Fiona Greig & Iris Bohnet, 2008. "Is There Reciprocity In A Reciprocal-Exchange Economy? Evidence Of Gendered Norms From A Slum In Nairobi, Kenya," Economic Inquiry, Western Economic Association International, vol. 46(1), pages 77-83, January.

    More about this item

    Keywords

    implicit contract; gift-giving; reciprocity; quasi-credit;

    JEL classification:

    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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