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Sharing Risk to Avoid Tragedy: Informal Insurance and Irrigation in Village Economies

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  • Karol Mazur

Abstract

I present a model of joint co-operation over irrigation and risk sharing in presence of limited commitment constraints. I estimate the model to the setting of three village economies in rural India. The implied dynamics are validated by non-targeted empirical evidence and show that if access to irrigation can be regulated by villagers, the two institutions reinforce each other. However, if ir¬rigation is non-excludable (as is the case with provision by central authorities), such investments harm local co-operation. Counterfactual experiments quan¬tify mutual reinforcement between the two institutions and gains attainable by replacing the government-owned irrigation.

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  • Karol Mazur, 2020. "Sharing Risk to Avoid Tragedy: Informal Insurance and Irrigation in Village Economies," CSAE Working Paper Series 2020-19-02, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:2020-19-02
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    More about this item

    Keywords

    Risk Sharing; Limited Commitment; Informal Institutions;
    All these keywords.

    JEL classification:

    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment

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