Investment Behaviour, Risk Sharing and Social Distance
This study uses a lab鈥恑n鈥恡he鈥恌ield experiment in Uganda to assess how risk sharing influences investment behaviour
Abstract
Using a lab鈥恑n鈥恡he鈥恌ield experiment in Uganda the authors 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, they 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.
This is an output from 鈥楢 Behavioural Economic Analysis of Agricultural Investment Decisions in Uganda鈥� project.
Citation
D鈥橢xelle, B. and Verschoor, A. (2015), Investment Behaviour, Risk Sharing and Social Distance. Economic Journal, 125: 777-802. doi:10.1111/ecoj.12264