Informal risk pooling : modelling issues and empirical evidence in Abidjan, Cte dIvoire

1
Informal risk pooling modelling issues and
empirical evidence in Abidjan, Côte dIvoire

• Yvan Guichaoua
• Cepremap
• yvan.guichaoua_at_cepremap.cnrs.fr

2
Political and empirical grounds of risk-pooling
arrangements literature

• Political stake
• fighting one dimension of poverty vulnerability
• Field surveyed
•  Agrarian societies ,  village economies 
• Evidence
• Various forms of reciprocity gift-giving,
  labour services, collective land tenure...
• ...leading to consumption smoothing when
  idiosyncratic changes in income occur

3
Papers objectives

• Present the way informal risk-sharing
  arrangements are modelled, with a particular
  focus on the role granted to extra-economic
  objects to warrant equilibrium attainment
• Provide some empirical evidence that
  extra-economic-objects (through various forms of
  pre-existing forms of socialisation) affect
  solidarity rules

4
Principles of risk-sharing arrangements modelling
(I)

• Initial conditions (autarky)
• A priori un-socialised rational agents exposed to
  risks
• Absence of legal enforcement mechanism
• Purpose
• To make cooperation emerge from the initial
  conditions specified above through self-enforcing
  contract formation (contractsharing rule of
  income differentials)
• Participation constraint
•  The difference between each individuals
  expected utility under continued participation
  should always be greater than the gain from
  current defection 

5
Principles of risk-sharing arrangements modelling
(II)

• Second-best contracts are feasible under
  restrictive conditions
• Risk aversion of agents should be sufficiently
  large
• Depreciation of future should not be too large
  ( eternal village  hypothesis)
• Furthermore
• Information is supposed to be perfect
• No convergence process toward equilibrium is
  provided if there are mutiple equilibria

6
Principles of risk-sharing arrangements modelling
(III)

• Conclusion to be sustained, cooperation needs
• At least, ad hoc implicit social objects
   eternal village , behavioural norms as focal
  points
• Explicit social objects sanctions on cheaters
  (not necessary but helpful)
• ? Social objects are necessary but are strictly
  exogenous
• ? Why not displace the focus to pre-existing
  social conditions of risk-sharing arrangements
  emergence (Aokis embeddedness hypothesis) ?

7
Some findings on solidarity practices among
informal workers in Abidjan, Côte dIvoire (I)

• Côte dIvoire (1998)
• Total population 15,4 M.
• Urbanisation rate 42,5
• Capital Abidjan
• Total population 3 M.
• 40 of the population living on informal income
• Survey sample
• 111 contruction and small-garment industry
  workers (not necessarily poor in absolute terms)

8
Some findings on solidarity practices among
informal workers in Abidjan, Côte dIvoire (II)

• Family kind of help

• Non-family kind of help ( help among peers ?)

9
Some findings on solidarity practices among
informal workers in Abidjan, Côte dIvoire (III)
Probability to participate in an association
10
Some findings on solidarity practices among
informal workers in Abidjan, Côte dIvoire (IV)

• Conclusions and questionings
• Informal risk-sharing arrangements do exist in
  cities
• Taking into account the social group(s) to which
  agents belong is relevant for the analysis of the
  kind of help they can receive
• Plausibility of substitution between family and
  non-family kinds of help (reversion of
  intrafamily transfers ?)
• Why do non-Ivorians not participate in
  associations ? Which kind of solidarity game do
  they play ?