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Risk Sharing Relations and Enforcement Mechanisms

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  • Abigail Barr
  • Marleen Dekker
  • Marcel Fafchamps

Abstract

We investigate whether the set of available enforcement mechanisms affects the formation of risk sharing relations by applying dyadic regression analysis to data from a specifically designed behavioural experiment, two surveys and a genealogical mapping exercise. During the experiment participants are invited to form risk sharing relations under three institutional environments, each associated with different enforcement mechanisms: external, intrinsic and endogenous extrinsic, i.e. the threat of (partial) social exclusion. Dyads who are similar in age and gender, genetically related, or who belong to the same organisations with an economic purpose are more likely to share risk. However, the latter are associated with less risk sharing when endogenous extrinsic incentives can be applied, while co-membership in religious congregations and being related to marriage support enforcement through such incentives. We find no evidence of assertive grouping on risk preferences but, ex post, co-group members’ risk-taking behaviour converges.

Suggested Citation

  • Abigail Barr & Marleen Dekker & Marcel Fafchamps, 2008. "Risk Sharing Relations and Enforcement Mechanisms," CSAE Working Paper Series 2008-14, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:2008-14
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    Cited by:

    1. Baland, Jean-Marie & Bonjean, Isabelle & Guirkinger, Catherine & Ziparo, Roberta, 2016. "The economic consequences of mutual help in extended families," Journal of Development Economics, Elsevier, pages 38-56.
    2. Margherita Comola & Marcel Fafchamps, 2014. "Testing Unilateral and Bilateral Link Formation," Economic Journal, Royal Economic Society, vol. 124(579), pages 954-976, September.
    3. Guido Friebel & Juan Gallego & Mariapia Mendola, 2013. "Xenophobic attacks, migration intentions, and networks: evidence from the South of Africa," Journal of Population Economics, Springer;European Society for Population Economics, pages 555-591.
    4. Marcel Fafchamps & Eliana La Ferrara, 2012. "Self-Help Groups and Mutual Assistance: Evidence from Urban Kenya," Economic Development and Cultural Change, University of Chicago Press, pages 707-733.
    5. Christine Binzel & Dietmar Fehr, 2010. "Social Relationships and Trust," Working Papers 542, Economic Research Forum, revised 09 Jan 2010.

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