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Voting over informal risk-sharing rules

Author

Listed:
  • Ambec, S.

Abstract

People vote over risk-sharing rules to cope with random revenues. Risk-sharing rules are enforced through peer pressure : those who comply exert a negative externality on those who do not. People are differently affected by this externality. The author determines the elected risk-sharing rules and the level of compliance. It turns out that full risk-sharing is achieved only if everybody complies. Partial risk-sharing is more often achieved with, sometime, some level of non-compliance. In many cases, a majority of people votes over and complies with the risk-sharing rule that maximizes their own expected payoff.

Suggested Citation

  • Ambec, S., 2005. "Voting over informal risk-sharing rules," Working Papers 200509, Grenoble Applied Economics Laboratory (GAEL).
    • Handle: RePEc:gbl:wpaper:200509
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    References listed on IDEAS

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    1. Abigail Barr, 2001. "Social dilemmas and shame-based sanctions: experimental results from rural Zimbabwe," CSAE Working Paper Series 2001-11, Centre for the Study of African Economies, University of Oxford.
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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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