thus be estimated more precisely.
The main findings of the empirical analysis can be summarized as follows. First, within each
group individual earnings increase with age and decrease with the number of years the individual
has been living in the current place. The time spent in the group, as a proxy for experience, has
a positive but insignificant impact on earnings, suggesting that the notion of ‘seniority’ rewarded
by these groups is strictly related to age. Second, women and young people are relatively more
dependent on group activities for their living, while adult males often have an alternative source of
income. ‘Dependency’ is also negatively correlated to the income that the individual was earning
before joining the group, suggesting that group production serves a particularly crucial function for
members with low ‘outside options’. Third, among the most valuable functions of these groups is
that of giving access to loans to otherwise credit constrained individuals. About 64 percent of the
respondents say that in case of need they borrow from the group as a whole or from individual
members. The most important factor to gain access to such loans seems to be speaking the same
language of the chairperson: ceteris paribus, members of the same ethnic group as the chairperson
are 20 to 25 percentage points more likely to borrow from the group or from other members. Fourth,
while ethnic fragmentation and wealth inequality do not affect the likelihood of borrowing, inequality
in group earnings has a negative and significant effect. The effect is particularly strong in groups
that experienced financial losses, suggesting that when the available capital to lend is particularly
scarce and members are not remunerated ‘uniformly’ it may be di‰ult to reach consensus on who
should get a loan. This hypothesis is corroborated by the fact that when loans from the group as a
whole are distinguished from loans from individual members, earnings inequality negatively affects
the former but not the latter. Finally, apart from affecting the allocation of loans, heterogeneity
seems to influence the organization of production. In more ethnically heterogeneous groups it is less
common for members to specialize in different task and more likely that everyone does the same job.
Also, ethnic fragmentation seems to be associated with remuneration schemes in which every worker
gets the same fixed amount, rather than being paid on the basis of the number of hours worked or
the number of items produced. Again, this may be due to the relative di‰ulty of reaching consensus
in heterogenous groups. The ability to sanction free riding behavior on contributions to the group