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Fraying of the Ties that Bind: HIV/AIDS and Informal Contract Enforcement in KwaZulu Natal, South Africa

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  • Linkow, Benjamin

Abstract

This paper provides a theoretical and empirical investigation of the effects of HIV/AIDS on communitylevel informal financial institutions such as rotating savings and credit associations. Our theoretical model illustrates that the mortality risk implied by the HIV/AIDS pandemic can put a significant strain on such institutions by shortening time horizons and weakening expectations of reciprocity on the part of participants. Mortality thus implies a community-wide externality, as even households that are not directly impacted by the disease are nonetheless adversely affected by living in high prevalence communities. Using panel data from the high-prevalence area of KwaZulu Natal, South Africa, we investigate the effects of community-level mortality on the rate of participation in community level financial and other types of groups. We find that mortality at the community level substantially reduces the prevalence of group membership, and that the differential impacts of mortality on different types of groups are consistent with the predictions of our theoretical model.

Suggested Citation

  • Linkow, Benjamin, 2009. "Fraying of the Ties that Bind: HIV/AIDS and Informal Contract Enforcement in KwaZulu Natal, South Africa," MPRA Paper 21769, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:21769
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    File URL: https://mpra.ub.uni-muenchen.de/21769/1/MPRA_paper_21769.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Anne Case & Anu Garrib & Alicia Menendez & Analia Olgiati, 2013. "Paying the Piper: The High Cost of Funerals in South Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 62(1), pages 1-20.
    3. David,Antonio C., 2007. "HIV/AIDS and social capital in a cross-section of countries," Policy Research Working Paper Series 4263, The World Bank.
    4. Simon Gachter & Ernst Fehr, 2000. "Cooperation and Punishment in Public Goods Experiments," American Economic Review, American Economic Association, vol. 90(4), pages 980-994, September.
    5. Anderson, Siwan & Baland, Jean-Marie & Moene, Karl Ove, 2009. "Enforcement in informal saving groups," Journal of Development Economics, Elsevier, vol. 90(1), pages 14-23, September.
    6. Miguel, Edward & Gugerty, Mary Kay, 2005. "Ethnic diversity, social sanctions, and public goods in Kenya," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2325-2368, December.
    7. Suneetha Kadiyala & Stuart Gillespie, 2006. "Community-level Impacts of AIDS-Related Mortality: Panel Survey Evidence from Zambia ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(3), pages 440-457.
    8. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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    More about this item

    Keywords

    HIV/AIDS; South Africa; Institutions; ROSCAs;

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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