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Limited Insurance Within the Household: Evidence from a Field Experiment in Kenya

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  • Robinson, Jonathan

Abstract

This paper presents results from a randomized …eld experiment to test for the impor- tance of limited commitment (due to incomplete contract enforceability) in explaining intra- household risk sharing arrangements in Kenya. The experiment followed 142 daily income earners and their spouses for 8 weeks. Every week, each individual had a 50% chance of receiving a 150 Kenyan shilling (US $2) income shock (equivalent to about 1.5 days’income for men and 1 week’s income for women). This paper has 2 main results. First, since the experimental payments are random, they allow for a direct test of allocative Pareto e¢ - ciency. I reject e¢ ciency, as male private goods expenditures are sensitive to the receipt of the payment. Second, the experiment varied the level of intra-household correlation in the experimental payments between couples. I …nd that women send bigger transfers to their husbands when shocks are independent or negatively correlated, a result consistent with the presence of limited commitment. I …nd no di¤erence in transfers for men, likely because the shocks were too small to cause the limited commitment constraint to bind for them.

Suggested Citation

  • Robinson, Jonathan, 2008. "Limited Insurance Within the Household: Evidence from a Field Experiment in Kenya," Santa Cruz Department of Economics, Working Paper Series qt2px0t7pt, Department of Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:ucscec:qt2px0t7pt
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    More about this item

    Keywords

    limited commitment; contract enforceability; intrahousehold risk sharing;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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