Investment Behaviour, Risk Sharing and Social Distance
26 Pages Posted: 27 May 2015
Date Written: May 2015
Abstract
Using a lab‐in‐the‐field experiment in Uganda we study how risk sharing influences investment behaviour. Depending on the treatment, an investor may decide to share profits with a paired person, and/or the paired person may compensate the investor for investment losses. Following sharing norms in African societies, predicted investment is higher if loss sharing is possible, and/or profit sharing is not possible. Contrary to these predictions, we find that investment is higher when losses may not be shared or when profits may be shared with friends. A combination of directed altruism and expected reciprocity appears most plausible to explain these results.
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Investment Behaviour, Risk Sharing and Social Distance
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