Do the Poor Benefit Less from Informal Risk-Sharing? Risk Externalities and Moral Hazard in Decentralized Insurance Arrangements

Is informal risk-sharing less effective for the poor? Risk externalities and moral hazard in mutual insurance

“…First, as regards the solution concept used to derive the risk-sharing scheme, the second best allocation determined by a social planner can also be obtained via a centralized bargaining process at the group level (see Delpierre et al (2014)). Furthermore, we have studied in Delpierre et al (2014), the case of a decentralized bargaining process where all potential pairs of agents set a specific transfer scheme so as to maximize the pair's joint surplus.…”

“…Furthermore, we have studied in Delpierre et al (2014), the case of a decentralized bargaining process where all potential pairs of agents set a specific transfer scheme so as to maximize the pair's joint surplus. This solution concept appears more realistic in an environment where enforcement devices are lacking, as it does not rely on the strong coordination imposed by the classical second best approach.…”