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Sharing risk to avoid tragedy: Informal insurance and irrigation in village economies

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  • Mazur, Karol

Abstract

Irrigation provides insurance against aggregate weather shocks, which can interact with other institutions functioning in village communities. I study this relationship in a model of joint co-operation over irrigation and risk sharing under limited commitment. The model dynamics show that if access to irrigation can be regulated by villagers, the two institutions reinforce each other. However, non-excludable irrigation crowds out risk sharing (as is the case with government-managed irrigation). I estimate the framework on data from three villages in India and use it to quantify the relationship between informal insurance and irrigation, and the welfare impact of irrigation public policy.

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  • Mazur, Karol, 2023. "Sharing risk to avoid tragedy: Informal insurance and irrigation in village economies," Journal of Development Economics, Elsevier, vol. 161(C).
    • Handle: RePEc:eee:deveco:v:161:y:2023:i:c:s0304387822001729
    DOI: 10.1016/j.jdeveco.2022.103030
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    More about this item

    Keywords

    Endogenous aggregate risk; Informal institutions; Agriculture;
    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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