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Stability in informal insurances: an approach by networks and overlapping coalitions

Author

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  • Messan Agbaglah

    () (Département d'économique, Université de Sherbrooke)

Abstract

Based on empirical facts, we build a model of informal insurance institutions and study their stability. In our setting, risk sharing groups are overlapping homogenous coalitions, originating from networks of historical trust relationships. We derive a general folk theorem that works in an environment of uncertainty and we identify the determinants of stability which are robust to social norms. Our results provide theoretical explanations for empirical findings, including the puzzle that rich families in rural economies in developing countries consume less. Our approach bridges the two traditional approaches of clubs and bilateral agreements.

Suggested Citation

  • Messan Agbaglah, 2014. "Stability in informal insurances: an approach by networks and overlapping coalitions," Cahiers de recherche 14-10, Departement d'Economique de l'École de gestion à l'Université de Sherbrooke.
  • Handle: RePEc:shr:wpaper:14-10
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    File URL: http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-1410.pdf
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    Keywords

    Informal insurance; networks; overlapping coalitions; stability;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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