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Journal of African Economies Advance Access published online on March 18, 2008
Journal of African Economies, doi:10.1093/jae/ejn001
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© The author 2008. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

Voting over Informal Risk–Sharing Rules

Stefan Ambec*

Toulouse School of Economics (INRA-LERNA), Toulouse, France

* Toulouse School of Economics (INRA-LERNA) 21 Allée de Brienne, 31000 Toulouse, France. Tel: +33 5 61 12 85 16; Fax: +33 5 61 12 85 20; E-mail stefan.ambec{at}toulouse.inra.fr. I thank Philippe De Donder and Francisco González, two anonymous referees, as well as the audience of the NEUDC Conference 2004 in Montreal, at the PET Meeting 2005 in Marseille, at the CSAE 2006 Conference in Oxford, and seminar participants at UQAM and Université Laval for useful comments.

This paper posits a new approach to informal risk-sharing in developing countries inspired by anthropological studies. A risk-sharing rule emerges as a collective choice which is enforced through peer-pressure. I determine the elected rules and the level of compliance with these rules. Full risk-sharing is achieved only if everybody complies. Partial risk-sharing arises more often with full or partial compliance. In many cases, a majority of people vote for and comply with the risk-sharing rule that maximises their own expected payoff. Yet a minority of people might comply with a rule which is detrimental to them.

JEL classification: H21, O12, O17


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