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Heterogeneity of Preferences, Limited Commitment and Coalitions Empirical Evidence on the Limits to Risk Sharing in Rural Pakistan

  • Dubois, Pierre

In this paper, we study the determinants of the value of informal risk sharing groups. In particular, we look at the effects of heterogeneity of preferences and of limited commitment constraints that restrict feasible allocations differently if individuals can deviate form risk sharing agreements in coalitions or not. We test impirically several predictable implications in rural Pakistan taking into account the heterogeneity of households' preferences. Our results show that exogenous size of risk sharing groups can be rejected or that only imperfect risk sharing is obtained within the village because of limited commitment and because of the risk of coalition formation that needs to be deterred. ...French Abstract : L'auteur étudie les déterminants de la valeur du partage de risque informel dans un groupe. En particulier, il étudie les effets de l'hétérogénéité des préférences et de l'engagementlimité sur les limites au partage des risques. Plusieurs implications sur des données au Pakistan sont testées, en tenant compte de l'hétérogénéité des préférences des ménages. Les résultats montrent qu'une taille, exogène des groupes de partage de risque peut-être rejetée ou qu'un partage de risque imparfait est obtenu dans le village à cause de contraintes d'engagement limité et à cause du risque de formation de coalitions.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 391.

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Date of creation: Aug 2005
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Handle: RePEc:ide:wpaper:5039
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