Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies

Robert Townsend

Journal of Economic Perspectives, 1995, vol. 9, issue 3, 83-102

Abstract: The hypothesis of full risk sharing can be taken to data from low-income countries and evaluate formal and informal financial systems. In many contexts, idiosyncratic risks are high, so credit/insurance arrangements could be beneficial. Statistical tests reveal that households in southern India take advantage of these possibilities; villages in Cote d'Ivoire and countries in Thailand do not do as well. The paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems. The full information and mechanism design frameworks provide benchmarks for policy analysis.

JEL-codes: O12 (search for similar items in EconPapers)
Date: 1995
Note: DOI: 10.1257/jep.9.3.83
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Citations: View citations in EconPapers (271)

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