Informal Insurance Arrangements in Village Economies

Ethan Ligon (), Jonathan Thomas () and Tim Worrall ()

Keele Department of Economics Discussion Papers (1995-2001) from Department of Economics, Keele University

Abstract: Recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income, thus rejecting the hypothesis of full risk-pooling. We attempt to explain these observations by adding limited commitment as an impediment to risk-pooling. We provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment, and test the model using data from from three Indian villages. We find that the model can fully explain the dynamic response of consumption to income, but that it fails to explain the distribution of consumption across households.

Keywords: Consumption smoothing; Informal insurance; Limited commitment; Village economies (search for similar items in EconPapers)
JEL-codes: D80 G22 O12 (search for similar items in EconPapers)
Date: 1997, Revised 2000-10
View list of references View citations in EconPapers

Published in Review of Economic Studies, Volume 69, January, 2002, pages 209-244.

Downloads: (external link)
http://www.keele.ac.uk/depts/ec/wpapers/9708.pdf (application/pdf)

Related works:
Working Paper: Informal Insurance Arrangements in Village Economies (1997)
Working Paper: Informal insurance arrangements in village economies (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:kee:keeldp:97/08

Ordering information: This working paper can be ordered from
Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom
http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm

Access Statistics for this paper

More papers in Keele Department of Economics Discussion Papers (1995-2001) from Department of Economics, Keele University
Address: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Contact information at EDIRC.
Series data maintained by Martin E. Diedrich ().