Author(s): Marcel Fafchamps and Eliana La Ferrara
This paper examines the incomes of individuals who have joined self-help groups in poor neighborhoods of Nairobi. Self-help groups are often advocated as a way of facilitating income pooling. We ...nd that incomes are indeed more correlated among individuals in the same group than among individuals who belong to dierent groups. Using an original methodology, we test whether this correlation is due to self-selection of similar individuals into the same groups. We ...nd that this correlation is not driven by positive assortative matching. If anything, selection works in the opposite direction: incomes from group activities would be more correlated if individuals were matched at random. These ...ndings are consistent with the idea that self-help groups play a mutual assistance role.
Keywords: mutual insurance; social capital; associations; self-selection
JEL codes: O12