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Social Norms and Individual Savings in the Context of Informal Insurance

  • Zaki Wahhaj

    ()

This paper develops a theory of informal insurance in the presence of an intertemporal technology. It is shown that when an insurance agreement suffers from enforcement problems, constraints on individual savings behaviour can enable the group to sustain greater cooperation. This result provides a motivation for a variety of social norms observed in traditional societies which discourage 'excessive' accumulation of wealth by individuals. The paper also shows that social norms that discourage savings are more likely to benefit poorer communities and thus, paradoxically, cause them to fall further behind even as it serves a useful purpose.

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File URL: http://www.brunel.ac.uk/__data/assets/pdf_file/0018/342720/CEDI_08-20.pdf
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Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 08-20.

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Length: 25 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:edb:cedidp:08-20
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  16. Coate, S. & Ravallion, M., 1989. "Reciprocity Without Commitment: Characterization and Performance of Informal Risk-Sharing Arrangements," Papers 96, Warwick - Development Economics Research Centre.
  17. Marcle Fafchamps, 1999. "Risk sharing and quasi-credit," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(3), pages 257-278.
  18. Francis Bloch & Vijayendra Rao & Sonalde Desai, 2004. "Wedding Celebrations as Conspicuous Consumption: Signaling Social Status in Rural India," Journal of Human Resources, University of Wisconsin Press, vol. 39(3).
  19. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
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