Risk sharing relations and enforcement mechanisms

Barr, A.; Dekker, M.; Fafchamps, M. (2008)

Research paper

We investigate whether the set of available enforcement mechanisms affects the formation of risk sharing relations by applying dyadic regression analysis to data from a specifically designed behavioural experiment, two surveys and a genealogical mapping exercise. During the experiment participants are invited to form risk sharing relations under three institutional environments, each associated with different enforcement mechanisms: external, intrinsic and endogenous extrinsic, i.e., the threat of (partial) social exclusion. Dyads who are similar in age and gender, genetically related, or who belong to the same organizations with an economic purpose are more likely to share risk. However, the latter are associated with less risk sharing when endogenous extrinsic incentives can be applied, while co-membership in religious congregations and being related by marriage support enforcement through such incentives. We find no evidence of assortative grouping on risk preferences but, ex post, co-groups members' risk-taking behavior converges.

• Gender
• marriage

• All authors: Barr, A.; Dekker, M.; Fafchamps, M.
• Date: 2008
• Title of host publication: CSAE Working Paper Series
• Issue: 80
• Name: 14