Employment, Group Membership and Risk-Pooling Behaviour: Field Evidence from South Africa

This paper analyses the joint determination of social network membership and employment status in stochastic environments, using data from a new survey undertaken in KwaZulu Natal province as well as ethnographic evidence. The results show strong links between membership of social networks and employment. In particular, being a member of a ROSCA or community-based burial society smooths positive as well as negative shocks both intertemporally as well as across individual members. The results also show that having access to a stable income source such as a social pension enhances the employment probabilities of individuals who reside in households recently sujected to health shocks. Where access to such nonstochastic income is rare, membership of ROSCAs and community based burial societies is common.