BREAD Working Paper No. 145 :: Informal Insurance in Social Networks by Francis Bloch, Garance Genicot, and Debraj Ray

Informal Insurance, Enforcement Constraints, and Group Formation

Informal insurance in social networks

This paper studies bilateral insurance schemes across networks of individuals. While transfers are based on social norms, each individual must have the incentive to abide by those norms, and so we investigate the structure of self-enforcing insurance networks. Network links play two distinct and possibly conflictual roles. First, they act as conduits for transfers. Second, they act as conduits ...

Reciprocity in Groups and the Limits to Social Capital

Robert Putnam defines social capital as “features of social organization, such as networks, norms and social trust that facilitate coordination and cooperation” (Putnam 1995: 67). Such networks are typically associated with norms that promote coordination, cooperation and reciprocity for the mutual benefit of network members. These norms, coupled with the appropriate use of sanctions in case of...

Aspirations, Inequality, Investment and Mobility

What individuals want for themselves, or what parents want for their children, is conditioned by society in fundamental ways. One such pathway is via the creation of individual aspirations (for their own future, or for their children’s future). To some extent, such aspirations are drawn from past individual experience (as in the literature on habit formation or reference points), but at the sam...

Group Formation in Risk-Sharing Arrangements

We study informal insurance within communities, explicitly recognizing the possibility that subgroups of individuals may destabilize insurance arrangements among the larger group. We therefore consider self-enforcing risk-sharing agreements that are robust not only to single-person deviations but also to potential deviations by subgroups. However, such deviations must be credible, in the sense ...