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Formal insurance and solidarity. Experimental evidence from Cambodia

Friederike Lenel and Susan Steiner

Journal of Economic Behavior & Organization, 2020, vol. 174, issue C, 212-234

Abstract: We study whether solidarity is conditioned on the availability of formal insurance: Are people less willing to support a person in need who could have insured against her loss? We report results from a lab-in-the-field experiment conducted in rural Cambodia. Private transfers decline substantially if the recipient could have avoided her neediness by purchasing insurance. We show that the decline in transfers is not triggered by the recipient’s intentional reliance on informal support but by the available insurance option per se. Furthermore, we find that individuals who are more engaged in informal support in their villages and individuals who are more familiar with formal insurance have a stronger inclination to condition their support on the available insurance option in the experiment. We argue that in the context of informal support arrangements, this type of conditional solidarity has emerged as a behavioral norm to prevent free-riding and to ensure the long-run stability of informal support.

Keywords: Informal support; Insurance; Social preferences; Cambodia (search for similar items in EconPapers)
JEL-codes: C91 G22 O12 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.jebo.2020.02.002

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Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

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