- Data collection collaborations
Imperfect Monitoring and Informal Risk Sharing: The Role of Social Ties.
Prachi Jain
- October 1, 2020
- 1:36 am
SECTOR
PROJECT TYPE
DOI
Location
BEHAVIORAL THEME
OVERVIEW
This paper examines whether social ties impact informal insurance in the presence of
asymmetric information. Using games with residents of informal settlements in Kenya,
I vary the observability of task completion and partners. While individuals are less
likely to make transfers as a result of imperfect monitoring, socially close individuals are
30% more likely to make transfers. As a result, socially close individuals are 47% more
likely to make transfers than socially distant individuals when task completion cannot
be observed.
THEMATIC AREAS
I then explore the mechanisms by which social connections influence risk
sharing. I find evidence that social connections increase participants’ motivation to
work only when task completion cannot be observed, potentially due to social collateral
and/or intrinsic motivation.