 Imperfect monitoring and informal insurance: The role of social tiesJournal of Economic Behavior & Organization, 2020, vol. 180, issue C, 241-256 Abstract: This paper examines whether social ties impact informal insurance in the presence of asymmetric information. Using games with residents of informal settlements in Kenya, I vary the observability of task completion and partners. While individuals are less likely to make transfers as a result of imperfect monitoring, socially close individuals are 30% more likely to make transfers. As a result, socially close individuals are 47% more likely to make transfers than socially distant individuals when task completion cannot be observed. I then explore the mechanisms by which social connections influence risk sharing. I find evidence that social connections increase participants’ motivation to work only when task completion cannot be observed, potentially due to social collateral and/or intrinsic motivation. Keywords: Asymmetric information; Social capital; Informal insurance; Risk sharing; Moral hazard; Laboratory experiments (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:180:y:2020:i:c:p:241-256 DOI: 10.1016/j.jebo.2020.09.028 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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