Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya

45 Pages Posted: 23 Aug 2017

See all articles by Renate Strobl

Renate Strobl

University of Basel

Conny Wunsch

University of Basel; IZA Institute of Labor Economics; CESifo (Center for Economic Studies and Ifo Institute); University of St. Gallen

Multiple version iconThere are 3 versions of this paper

Date Written: June 2018

Abstract

In this study we experimentally investigate whether solidarity, which is a crucial base for informal insurance arrangements in developing countries, is sensitive to the extent to which individuals can influence their risk exposure. With slum dwellers of Nairobi our design measures subjects’ willingness to share income with a worse-off partner both in a setting where participants could either deliberately choose or were randomly assigned to a safe or a risky project. We find that only a subgroup of subjects reduces willingness to give when risk exposure is a choice. Responses are limited to donors in the risky project, whereas donors in the safe project do not adjust their willingness to give. This difference in behaviour can be explained by differential giving in the absence of choice. Lucky winners with the risky project show a particularly high degree of solidarity with unlucky losers compared to donors and partners assigned to the safe project when they face risk for exogenous reasons. The possibility of free project choice removes these differences in generosity and we show that this is driven by attributions of responsibility for neediness. Our results suggest that crowding out of informal support might be less severe than suggested by the studies from Western countries and the evidence on formal insurance from developing countries.

Keywords: solidarity, risk taking, Kenya

JEL Classification: D810, C910, O120, D630

Suggested Citation

Strobl, Renate and Wunsch, Conny, Does Voluntary Risk Taking Affect Solidarity? Experimental Evidence from Kenya (June 2018). CESifo Working Paper Series No. 6578. Available at SSRN: https://ssrn.com/abstract=3023224

Renate Strobl

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

Conny Wunsch (Contact Author)

University of Basel ( email )

Petersplatz 1
Basel, CH-4003
Switzerland

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of St. Gallen ( email )

Dufourstrasse 50
St. Gallen, 9000
Switzerland

Register to save articles to
your library

Register

Paper statistics

Downloads
26
Abstract Views
146
PlumX Metrics