Voting over Informal Risk-Sharing Rules

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. Copyright 2008 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, Oxford University Press.