DP14148 Altruism, Insurance, And Costly Solidarity Commitments1
Inter-household transfers play a central role in village economies. Whether
understood as informal insurance, credit, or social taxation, the dominant concep-
tual models used to explain transfers rest on a foundation of self-interested dynamic
behavior. Using experimental data from households in rural Ghana, where we ran-
domized private and publicly observable cash payouts repeated every other month for
a year, we reject two core predictions of the dominant models. We then add impure
altruism and social taxation to a model of limited commitment informal insurance
networks. The data support this new model's predictions, including that unobserv-
able income shocks may facilitate altruistic giving that better targets less-well-off
individuals within one's network, and that too large a network can overwhelm even
an altruistic agent, inducing her to cease giving.
