Voting over informal risk-sharing rules

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Periodical article

Title:	Voting over informal risk-sharing rules
Author:	Ambec, Stefan
Year:	2008
Periodical:	Journal of African Economies
Volume:	17
Issue:	4
Pages:	635-659
Language:	English
Geographic term:	Subsaharan Africa
Subjects:	risk economic behaviour communities
External link:	https://jae.oxfordjournals.org/content/17/4/635.full.pdf
Abstract:	A risk-sharing rule is a redistribution scheme from the most 'successful' persons to the less successful ones. It is collectively designed by the community. This paper posits a new approach to informal risk-sharing in developing countries - particularly sub-Saharan Africa - inspired by anthropological studies. A risk-sharing rule emerges as a collective choice which is enforced through peer-pressure. The paper determines the elected rules and the level of compliance with these rules. Full risk sharing is achieved only if everybody complies. Partial risk sharing arises more often with full or partial compliance. In many cases, a majority of people vote for and comply with the risk-sharing rule that maximizes their own expected payoff. Yet a minority of people might comply with a rule which is detrimental to them. Bibliogr., notes, ref., sum. [Journal abstract]