Gift-Giving, Quasi-Credit and Reciprocity

32 Pages Posted: 19 May 2002

See all articles by Jonathan Thomas

Jonathan Thomas

University of Edinburgh - Economics; CESifo (Center for Economic Studies and Ifo Institute)

Tim S. Worrall

University of Edinburgh

Date Written: March 2002

Abstract

The fluctuations in incomes inherent in rural communities can be attenuated by reciprocal insurance. We develop a model of such insurance based on self-interested behaviour and voluntary participation. One individual assists another only if the costs of so doing are outweighed by the benefits from expected future reciprocation. A distinction is made between general reciprocity where the counter obligation is expected but not certain and balanced reciprocity where there is a firm counter obligation. This firm counter obligation is reflected by including a loan or quasi-credit element in any assistance. It is shown how this can increase the insurance provided and how it may explain the widespread use of quasi-credit in rural communities. Moreover it is shown that for a range of parameter values consistent with evidence from three villages in southern India, a simple scheme of gift-giving and quasi-credit can do almost as well as theoretically better but more complicated schemes.

Keywords: Implicit Contract, Gift-giving, Reciprocity, Quasi-credit

JEL Classification: D89, O16, O17

Suggested Citation

Thomas, Jonathan P. and Worrall, Tim S., Gift-Giving, Quasi-Credit and Reciprocity (March 2002). Available at SSRN: https://ssrn.com/abstract=306523

Jonathan P. Thomas (Contact Author)

University of Edinburgh - Economics ( email )

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Edinburgh, EH8 9JY, Scotland
United Kingdom
+44 131 650 4515 (Phone)
+44 131 650 4514 (Fax)

HOME PAGE: http://www.st-andrews.ac.uk/~jpt/

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.cesifo.de

Tim S. Worrall

University of Edinburgh ( email )

30 Buccleuch Place
Edinburgh, Scotland EH8 9JY
United Kingdom
(0)131 651 5128 (Phone)

HOME PAGE: http://www.timworrall.com

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