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Are gifts and loans between households voluntary?

Author

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  • Margherita Comola

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • Marcel Fafchamps

    (University of Oxford [Oxford])

Abstract

Using village data from Tanzania, we test whether gifts and loans between households are voluntary while correcting for mis-reporting by the giving and receiving households. Two maintained assumptions underlie our analysis: answers to a question on who people would turn to for help are good proxies for willingness to link; and, conditional on regressors, the probability of reporting a gift or loan is independent between giving and receiving households. Building on these assumptions, we develop a new estimation methodology that corrects for response bias. Our testing strategy is based on the idea that, if lending and gift giving are voluntary, then both households should want to rely on each other for help. We find only weak evidence to support bilateral link formation. We do, however, find reasonably strong evidence to support unilateral link formation. Results suggest that if a household wishes to enter in a reciprocal relationship with someone who is sufficiently close socially and geographically, it can do so unilaterally.

Suggested Citation

  • Margherita Comola & Marcel Fafchamps, 2010. "Are gifts and loans between households voluntary?," PSE Working Papers halshs-00564894, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00564894
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00564894
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    References listed on IDEAS

    as
    1. De Weerdt, Joachim & Dercon, Stefan, 2006. "Risk-sharing networks and insurance against illness," Journal of Development Economics, Elsevier, vol. 81(2), pages 337-356, December.
    2. repec:pse:psecon:2009-30 is not listed on IDEAS
    3. Ethan Ligon & Jonathan P. Thomas & Tim Worrall, 1997. "Informal Insurance Arrangements in Village Economies," Keele Department of Economics Discussion Papers (1995-2001) 97/08, Department of Economics, Keele University, revised Oct 2000.
    4. Margherita Comola & Marcel Fafchamps, 2014. "Testing Unilateral and Bilateral Link Formation," Economic Journal, Royal Economic Society, vol. 124(579), pages 954-976, September.
    5. Siwan Anderson & Jean-Marie Baland, 2002. "The Economics of Roscas and Intrahousehold Resource Allocation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 963-995.
    6. Hayami, Y & Platteau, J-P, 1997. "Resource Endowments and Agricultural Development : Africa vs. Asia," Papers 192, Notre-Dame de la Paix, Sciences Economiques et Sociales.
    7. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
    8. Fafchamps, Marcel & Gubert, Flore, 2007. "The formation of risk sharing networks," Journal of Development Economics, Elsevier, vol. 83(2), pages 326-350, July.
    9. Arcand, Jean-Louis & Fafchamps, Marcel, 2012. "Matching in community-based organizations," Journal of Development Economics, Elsevier, vol. 98(2), pages 203-219.
    10. 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.
    11. Margherita Comola & Marcel Fafchamps, 2014. "Testing Unilateral and Bilateral Link Formation," Economic Journal, Royal Economic Society, vol. 124(579), pages 954-976, 09.
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    Cited by:

    1. repec:dau:papers:123456789/12203 is not listed on IDEAS
    2. Christophe Nordman & Julia Vaillant, 2013. "Inputs, Gender Roles or Sharing Norms? Assessing the Gender Performance Gap Among Informal Entrepreneurs in Madagascar," Working Papers DT/2013/15, DIAL (Développement, Institutions et Mondialisation).
    3. Pamela Jakiela & Owen Ozier, 2016. "Does Africa Need a Rotten Kin Theorem? Experimental Evidence from Village Economies," Review of Economic Studies, Oxford University Press, vol. 83(1), pages 231-268.
    4. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2012. "Insurance versus Savings for the Poor: Why One Should Offer Either Both or None," IZA Discussion Papers 6298, Institute for the Study of Labor (IZA).
    5. Landmann, Andreas & Vollan, Björn & Frölich, Markus, 2011. "Saving, Microinsurance: Why You Should Do Both or Nothing. A Behavioral Experiment on the Philippines," Proceedings of the German Development Economics Conference, Berlin 2011 51, Verein für Socialpolitik, Research Committee Development Economics.

    More about this item

    Keywords

    risk sharing; reporting bias; social networks;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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