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Informal Insurance Arrangements in Village Economies Author info | Abstract | Publisher info | Download info | Related research | Statistics Ethan Ligon
Jonathan P. Thomas
Tim Worrall
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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.
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Paper provided by Department of Economics, Keele University in its series Keele Department of Economics Discussion Papers (1995-2001) with number
97/08.
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Date of creation: 1997Date of revision:
Oct 2000Publication status: Published in Review of Economic Studies, Volume 69, January, 2002, pages 209-244.Handle: RePEc:kee:keeldp:97/08Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom Phone: +44 (0)1782 584581 Fax: +44 (0)1782 717577 Email: Web page: http://www.keele.ac.uk/depts/ec/cer/ More information through EDIRC
Order Information: Postal: Department of Economics, Keele University, Keele, Staffordshire ST5 5BG - United Kingdom Email: Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm
For technical questions regarding this item, or to correct its listing, contact: (Martin E. Diedrich).
Keywords: Consumption smoothing Informal insurance Limited commitment Village economies Other versions of this item:
Paper Ethan Ligon & Jonathan P Thomas & Tim Worrall, 1997.
"Informal Insurance Arrangements in Village Economies ,"
CRIEFF Discussion Papers
9705, Centre for Research into Industry, Enterprise, Finance and the Firm.
Ligon, Ethan & Thomas, Jonathan P. & Worrall, Tim, 1997.
"Informal insurance arrangements in village economies ,"
CUDARE Working Paper Series
825, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
Find related papers by JEL classification: D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
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