Altruism, Insurance, And Costly Solidarity Commitments

Inter-household transfers play a central role in village economies. Whether understood as informal insurance, credit, or social taxation, the dominant conceptual models used to explain transfers rest on a foundation of self-interested dynamic behavior. Using experimental data from households in rural Ghana, where we randomized 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 unobservable 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.