Investment Behaviour, Risk Sharing and Social Distance

26 Pages Posted: 27 May 2015

See all articles by Ben D'Exelle

Ben D'Exelle

University of East Anglia (UEA)

Arjan Verschoor

University of East Anglia (UEA)

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.

Suggested Citation

D’Exelle, Ben and Verschoor, Arjan, Investment Behaviour, Risk Sharing and Social Distance (May 2015). The Economic Journal, Vol. 125, Issue 584, pp. 777-802, 2015. Available at SSRN: https://ssrn.com/abstract=2610933 or http://dx.doi.org/10.1111/ecoj.12264

Ben D’Exelle (Contact Author)

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, NR4 7TJ
United Kingdom

Arjan Verschoor

University of East Anglia (UEA) ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

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