Financial Systems in Northern Thai Villages

With the theory of optimal risk bearing and complete markets in mind, field research and an administered survey attempted to measure the key features of the environment and the outcomes of ten poor, high risk villages in northern Thailand. Various key features are uncovered. The paper presents these features and then tries to explain or interpret these features with either a full risk sharing complete markets general equilibrium model or an information constrained version of the same model r Observations from some of the villages are consistent with one or the other -oi these models, but in many of the villages one is left with risk-response variations across households which suggest that Pareto improvements are possible. The paper identifies these villages and households along with the nature of the apparent inefficiency. The information provided in this paper might be used by policy makers in the evaluation of existing village level programs or in targeting potential clients and the design of new programs. Alternatively, observations which are anomalous to the benchmark models might indicate there are factors left out of the models. The field research provides some specific guesses about what some of these factors might be.