Altruism, Insurance, and Costly Solidarity Commitments

• Agricultural Economics Workshop
• Development Workshop

Date and Location

Thursday, February 27, 2020, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

Inter-household transfers play a central role in village economies. Whether understood as informal insurance, credit, or social taxation, the dominant conceptual models used to explain transfers rest on a foundation of self-interested dynamic behavior. Using experimental data from households in rural Ghana, where we randomized private and publicly observable cash payouts repeated every other month for a year, we reject two core predictions of the dominant models. We then add impure altruism and social taxation to a model of limited commitment informal insurance networks. The data support this new model’s predictions, including that unobservable income shocks may facilitate altruistic giving that better targets less-well-off individuals within one’s network, and that too large a network can overwhelm even an altruistic agent, inducing her to cease giving.