The introduction of formal insurance and its effect on redistribution

Dan Anderberg and Karlijn Marsink

No 7596, CESifo Working Paper Series from CESifo

Abstract: Transfers motivated by altruism, norms of giving, and guilt play an important role in supporting individuals who suffer losses due to risk. We present empirical evidence from an artefactual field experiment in Ethiopia in which we introduce formal insurance in a setting where donors make redistributive transfers to anonymously paired recipients. We find that donors reduce their transfers to recipients who don’t take-up insurance, and that this effect is larger for donors who hold the ex ante belief that the recipient is more likely to take-up insurance. The findings are consistent with a model of a norm of giving where donors feel guilty for deviating from the norm. The feelings of guilt decline with the expected social distance, that is revealed by the recipients’ observable insurance uptake decisions. The model highlights how the introduction of formal insurance may erode norms of giving and lead vulnerable groups to face more volatile consumption.

Keywords: formal insurance; transfers; norms of giving; guilt; social distance (search for similar items in EconPapers)
JEL-codes: D64 D91 G22 O16 O17 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-exp, nep-hea and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7596

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