Now or later? The allocation of the pot and the insurance motive in fixed roscas

Jean-Marie Baland, Catherine Guirkinger and Renate Hartwig

Journal of Development Economics, 2019, vol. 140, issue C, 1-11

Abstract: We start from the observation that, in fixed roscas in Sub-Saharan African, members often prefer to take the last turn. We argue that, when exchanges of turns are allowed during a cycle, a late turn allows to request the pot when an urgent need arises. Survey data indicate that insurance needs are critical in determining the preferred position of rosca members. We develop a theoretical model to formalize the argument and show that the preference for the last position requires that the probability of a shock is neither too low nor too high. We test this prediction in a lab-in-the-field experiment and confirm that the preference for being last is non-monotonic in the risk of negative shocks.

Keywords: Insurance; Risk; Roscas (search for similar items in EconPapers)
JEL-codes: C93 D02 D14 O16 O17 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:140:y:2019:i:c:p:1-11

DOI: 10.1016/j.jdeveco.2019.04.001

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