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Social norms and individual savings in the context of informal insurance

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  • Wahhaj, Zaki

Abstract

This paper develops a theory of informal insurance in the presence of an intertemporal technology. It is shown that when an insurance agreement suffers from enforcement problems, constraints on individual savings behaviour can enable the group to sustain greater cooperation. This result provides a motivation for a variety of social norms observed in traditional societies which discourage 'excessive' accumulation of wealth by individuals. The paper also shows that social norms that discourage savings are more likely to benefit poorer communities and thus, paradoxically, cause them to fall further behind even as it serves a useful purpose.

Suggested Citation

  • Wahhaj, Zaki, 2010. "Social norms and individual savings in the context of informal insurance," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 511-530, December.
    • Handle: RePEc:eee:jeborg:v:76:y:2010:i:3:p:511-530
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    Cited by:

    1. Heath Henderson & Arnob Alam, 2022. "The structure of risk-sharing networks," Empirical Economics, Springer, vol. 62(2), pages 853-886, February.
    2. Pal, Sarmistha & Wahhaj, Zaki, 2017. "Fiscal decentralisation, local institutions and public good provision: evidence from Indonesia," Journal of Comparative Economics, Elsevier, vol. 45(2), pages 383-409.
    3. Francesc Dilmé & Daniel F. Garrett, 2023. "Relational Contracts: Public versus Private Savings," Econometrica, Econometric Society, vol. 91(3), pages 1025-1075, May.
    4. Posso, Alberto, 2023. "Terrorism, banking, and informal savings: Evidence from Nigeria," Journal of Banking & Finance, Elsevier, vol. 150(C).
    5. Li, Zhimin & Ligon, Ethan, 2020. "Inferring informal risk-sharing regimes: Evidence from rural Tanzania," Journal of Economic Behavior & Organization, Elsevier, vol. 177(C), pages 941-955.
    6. Strupat, Christoph & Klohn, Florian, 2018. "Crowding out of solidarity? Public health insurance versus informal transfer networks in Ghana," World Development, Elsevier, vol. 104(C), pages 212-221.

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    More about this item

    Keywords

    Informal insurance Social norms Savings behaviour Culture and economic development;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Z1 - Other Special Topics - - Cultural Economics

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