IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp13688.html
   My bibliography  Save this paper

Crowding-Out or Crowding-In? Heterogeneous Effects of Insurance on Solidarity

Author

Listed:
  • Landmann, Andreas

    (University of Erlangen-Nuremberg)

  • Vollan, Björn

    (University of Marburg)

  • Henning, Karla

    (KfW Development Bank)

  • Frölich, Markus

    (University of Mannheim)

Abstract

We analyze whether the availability of formal insurance products affects informal solidarity transfers in two independent behavioral experiments in the Philippines. The first experiment allows for communication, non-anonymity and unrestricted transfers. The second experiment mimics a laboratory setting without communication and preserves anonymity, which minimizes strategic concerns. The introduction of an insurance treatment alters solidarity in both experiments. We find crowding-out effects in the first setting with strategic motives, while there are even crowding-in effects due to insurance availability in the anonymous experiment. These and additional supporting results are in line with crowding-out of strategic, but not necessarily intrinsic motives due to the availability of insurance.

Suggested Citation

  • Landmann, Andreas & Vollan, Björn & Henning, Karla & Frölich, Markus, 2020. "Crowding-Out or Crowding-In? Heterogeneous Effects of Insurance on Solidarity," IZA Discussion Papers 13688, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp13688
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp13688.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    3. Stephen Leider & Markus M. Möbius & Tanya Rosenblat & Quoc-Anh Do, 2009. "Directed Altruism and Enforced Reciprocity in Social Networks," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1815-1851.
    4. Margherita Comola & Marcel Fafchamps, 2010. "Are gifts and loans between households voluntary?," PSE Working Papers halshs-00564894, HAL.
    5. Ligon, Ethan & Schechter, Laura, 2012. "Motives for sharing in social networks," Journal of Development Economics, Elsevier, vol. 99(1), pages 13-26.
    6. Lin, Wanchuan & Liu, Yiming & Meng, Juanjuan, 2014. "The crowding-out effect of formal insurance on informal risk sharing: An experimental study," Games and Economic Behavior, Elsevier, vol. 86(C), pages 184-211.
    7. Fischbacher, Urs & Gachter, Simon & Fehr, Ernst, 2001. "Are people conditionally cooperative? Evidence from a public goods experiment," Economics Letters, Elsevier, vol. 71(3), pages 397-404, June.
    8. Claudia Keser & Frans Van Winden, 2000. "Conditional Cooperation and Voluntary Contributions to Public Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 23-39, March.
    9. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    10. Grimm, Michael & Hartwig, Renate & Lay, Jann, 2017. "Does forced solidarity hamper investment in small and micro enterprises?," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 827-846.
    11. Ahmed Mushfiq Mobarak & Mark R. Rosenzweig, 2013. "Informal Risk Sharing, Index Insurance, and Risk Taking in Developing Countries," American Economic Review, American Economic Association, vol. 103(3), pages 375-380, May.
    12. Morduch, Jonathan, 1999. "Between the State and the Market: Can Informal Insurance Patch the Safety Net?," World Bank Research Observer, World Bank Group, vol. 14(2), pages 187-207, August.
    13. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-477, June.
    14. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
    15. Dercon, Stefan & Hill, Ruth Vargas & Clarke, Daniel & Outes-Leon, Ingo & Seyoum Taffesse, Alemayehu, 2014. "Offering rainfall insurance to informal insurance groups: Evidence from a field experiment in Ethiopia," Journal of Development Economics, Elsevier, vol. 106(C), pages 132-143.
    16. Selten, Reinhard & Ockenfels, Axel, 1998. "An experimental solidarity game," Journal of Economic Behavior & Organization, Elsevier, vol. 34(4), pages 517-539, March.
    17. Pedro Albarran & Orazio P. Attanasio, 2003. "Limited Commitment and Crowding out of Private Transfers: Evidence from a Randomised Experiment," Economic Journal, Royal Economic Society, vol. 113(486), pages 77-85, March.
    18. Bruno S. Frey & Reto Jegen, 2001. "Motivation Crowding Theory," Journal of Economic Surveys, Wiley Blackwell, vol. 15(5), pages 589-611, December.
    19. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
    20. Attanasio, Orazio & Rios-Rull, Jose-Victor, 2000. "Consumption smoothing in island economies: Can public insurance reduce welfare?," European Economic Review, Elsevier, vol. 44(7), pages 1225-1258, June.
    21. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hample, Kelsey C, 2021. "Formal insurance for the informally insured: Experimental evidence from Kenya," World Development Perspectives, Elsevier, vol. 22(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blumenstock, Joshua E. & Eagle, Nathan & Fafchamps, Marcel, 2016. "Airtime transfers and mobile communications: Evidence in the aftermath of natural disasters," Journal of Development Economics, Elsevier, vol. 120(C), pages 157-181.
    2. Lin, Wanchuan & Meng, Juanjuan & Weng, Xi, 2020. "Formal insurance and informal risk sharing dynamics," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 837-863.
    3. Grimm, Michael & Hartwig, Renate & Reitmann, Ann-Kristin & Bocoum, Fadima Yaya, 2021. "Inter-household transfers: An empirical investigation of the income-transfer relationship with novel data from Burkina Faso," World Development, Elsevier, vol. 144(C).
    4. Strupat, Christoph & Klohn, Florian, 2018. "Crowding out of solidarity? Public health insurance versus informal transfer networks in Ghana," World Development, Elsevier, vol. 104(C), pages 212-221.
    5. Philipp E. Otto & Daniel Dittmer, 2019. "Simultaneous but independent ultimatum game: strategic elasticity or social motive dependency?," International Journal of Game Theory, Springer;Game Theory Society, vol. 48(1), pages 61-80, March.
    6. Midler, Estelle & Pascual, Unai & Drucker, Adam G. & Narloch, Ulf & Soto, José Luis, 2015. "Unraveling the effects of payments for ecosystem services on motivations for collective action," Ecological Economics, Elsevier, vol. 120(C), pages 394-405.
    7. Hanna Freudenreich & Marcela Ibanez & Stephan Dietrich & Oliver Musshoff, 2018. "Formal insurance, risk sharing, and the dynamics of other-regarding preferences," Department of Agricultural and Rural Development (DARE) Discussion Papers 266532, Georg-August-Universitaet Goettingen, Department of Agricultural Economics and Rural Development (DARE).
    8. Dufwenberg, Martin & Patel, Amrish, 2017. "Reciprocity networks and the participation problem," Games and Economic Behavior, Elsevier, vol. 101(C), pages 260-272.
    9. Stephen Leider & Markus M. Möbius & Tanya Rosenblat & Quoc-Anh Do, 2009. "Directed Altruism and Enforced Reciprocity in Social Networks," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1815-1851.
    10. Anderberg, Dan & Morsink, Karlijn, 2020. "The introduction of formal insurance and its effect on redistribution," Journal of Economic Behavior & Organization, Elsevier, vol. 179(C), pages 22-45.
    11. Thorsten Chmura & Christoph Engel & Markus Englerth, 2013. "Selfishness As a Potential Cause of Crime. A Prison Experiment," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_05, Max Planck Institute for Research on Collective Goods.
    12. Boosey, Luke A., 2017. "Conditional cooperation in network public goods experiments," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 69(C), pages 108-116.
    13. Bodo Sturm & Joachim Weimann, 2006. "Experiments in Environmental Economics and Some Close Relatives," Journal of Economic Surveys, Wiley Blackwell, vol. 20(3), pages 419-457, July.
    14. Gary Charness & Garance Genicot, 2009. "Informal Risk Sharing in an Infinite‐Horizon Experiment," Economic Journal, Royal Economic Society, vol. 119(537), pages 796-825, April.
    15. Luigi Butera & John A. List, 2017. "An Economic Approach to Alleviate the Crises of Confidence in Science: With an Application to the Public Goods Game," NBER Working Papers 23335, National Bureau of Economic Research, Inc.
    16. Bruno S. Frey & Stephan Meier, "undated". "Social Comparisons and Pro-social Behavior - Testing �Conditional Cooperation� in a Field Experiment," IEW - Working Papers 162, Institute for Empirical Research in Economics - University of Zurich.
    17. Kurt A. Ackermann & Ryan O. Murphy, 2019. "Explaining Cooperative Behavior in Public Goods Games: How Preferences and Beliefs Affect Contribution Levels," Games, MDPI, vol. 10(1), pages 1-34, March.
    18. Di Falco, Salvatore & Feri, Francesco & Pin, Paolo & Vollenweider, Xavier, 2018. "Ties that bind: Network redistributive pressure and economic decisions in village economies," Journal of Development Economics, Elsevier, vol. 131(C), pages 123-131.
    19. Bosworth, Steven J. & Singer, Tania & Snower, Dennis J., 2016. "Cooperation, motivation and social balance," Journal of Economic Behavior & Organization, Elsevier, vol. 126(PB), pages 72-94.
    20. Frey, Bruno S. & Meier, Stephan, 2004. "Pro-social behavior in a natural setting," Journal of Economic Behavior & Organization, Elsevier, vol. 54(1), pages 65-88, May.

    More about this item

    Keywords

    insurance; solidarity; crowding effects; lab-in-the-field experiment; Philippines;
    All these keywords.

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp13688. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.