Risk Sharing in Village Economies Revisited

Tessa Bold and Tobias Broer ()
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Tessa Bold: Stockholm University
Tobias Broer: PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Stockholm University

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Abstract: We quantitatively evaluate a model of insurance with limited commitment where the requirement that contracts be immune to deviations by subcoalitions makes group size endogenous, as proposed by Genicot and Ray. We compare the model's predictions to panel data from rural Indian villages. Apart from predicting a realistic degree of insurance, the model captures the evidence along two new dimensions: First, the largest coalition-proof groups are substantially smaller than typical villages. Second, with strong insurance in small groups, individual consumption responds symmetrically to income rises and falls, while alternative models predict strong counterfactual asymmetry.

Date: 2021-12
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Citations: View citations in EconPapers (5)

Published in Journal of the European Economic Association, 2021, 19 (6), pp.3207-3248. ⟨10.1093/jeea/jvab043⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-03758973

DOI: 10.1093/jeea/jvab043

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