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Self-help groups and mutual assistance: Evidence from urban Kenya
By 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 di¤erent 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.

JEL codes: O12
Keywords: mutual insurance; social capital; associations; self-selection

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Last updated June 21, 2011