Social Insurance and Economic Growth

Project overview

If productive individuals within a village are subject to implicit progressive redistributive taxes, this can have pervasive implications for incentives to work, accumulate wealth, migration and ultimately growth. This project looks at data for consumption, income, and network information for a complete village in rural Malawi, to keep track of the status quo redistributive tax/subsidy scheme and its relation to productivity within village. In this context, we plan to model and estimate pairwise transfer schemes along a village network and study the optimal provision of social insurance.

Summary, output, and dissemination

Research summary

The ability to insure consumption against income risk in poor economies is well understood in the development literature. In most instances, this social insurance is achieved with informal arrangements within close relatives/friends/neighbors. However, less is known about how the provision of social insurance affects factor accumulation (e.g., human and physical wealth), or improvements in productivity through resource allocation. In particular, is the current status quo provision of social insurance efficient in fostering economic growth? If productive individuals within a village are subject to implicit progressive redistributive taxes (e.g. through networks structures within (and across) village(s) that finance the provision of insurance for the rest of the village, this can have pervasive implications for incentives to work, accumulate wealth, migrate and ultimately grow.

In this context, we believe that shifting the current macro paradigm to unified frameworks that jointly determine growth, risk and insurance can be an important avenue for the positive and normative analysis of growth and development. The aim of our study is to provide one such framework. 

This project has already conducted considerable fieldwork. It has recently received and cleaned the data collected during August 2019. No analytical or quantitative results are currently available, however, a preliminary analysis relating insurance to agricultural productivity is currently being conducted. The first set of quantitative results are expected before mid-2023.

Conference and presentation

• Conference in Zomba, Malawi on July 2019
• Presentation of the paper “Excess of Transfer Progressivity in the Village” at the European University Institute

Project webpage

Social Insurance and Economic Growth: Networks Panel in Village Malawi