Kin Groups and Reciprocity: A Model of Credit Transactions in Ghana
Open Access
- 1 November 2003
- journal article
- Published by American Economic Association in American Economic Review
- Vol. 93 (5) , 1730-1751
- https://doi.org/10.1257/000282803322655518
Abstract
This paper studies kinship band networks as capital market institutions. Membership in a community where individuals are dynastically linked has two effects on informal credit. First, the nonanonymity of the dynastic link allows to sanction the defaulters' offspring and induce compliance even in short-term interactions (social enforcement). Second, preferential agreements can arise in which kin members condition their behavior on the characteristics of a player's predecessor, expecting others to do the same with their offspring (reciprocity). These effects are incorporated in an OLG game with endogenous matching between lenders and borrowers and tested using household-level data from Ghana.Keywords
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