Incentive for risk sharing and trust formation: Experimental and survey evidence from Bangladesh

Shoji, Masahiro (2016): Incentive for risk sharing and trust formation: Experimental and survey evidence from Bangladesh.

Abstract

Using data from a unique household survey and an artefactual field experiment conducted in rural Bangladesh, this study evaluates the impact on trust in community members of incentive for risk-sharing arrangement between villagers. Risk sharing provides a major opportunity for cooperation in rural economies, and the experience of cooperation could facilitate trust. In order to test this hypothesis, this study characterizes the incentive for risk sharing by the patterns of exogenous income shocks in the real world and risk preference, and trust in community members is elicited experimentally. The empirical results from dyadic regression demonstrate that villagers connected by a stronger incentive form a higher level of trust.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trust formation; risk sharing; experiment; Bangladesh
• Subjects: C - Mathematical and Quantitative Methods > C9 - Design of Experiments > C91 - Laboratory, Individual Behavior; D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis

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