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Consumption insurance with heterogeneous preferences. Can sharecropping help complete markets ?

  • Dubois, P.

This paper presents the first evidence linking directly household consumption profiles to the widely studied institution of sharecropping in developing countries. On the one hand, the theoretical rationale for sharecropping often calls for its risk sharing properties. On the other hand empirical studies on risk sharing in consumption often reject full insurance but admit that some formal or informal mechanisms help households to insure substantially their consumption since income shocks do not fully transfer in consumption. Risk sharing and consumption insurance achieved by rural households from three provinces of Pakistan are studied allowing for heterogeneity of preferences and in particular in risk aversion. As full insurance is rejected, there is some scope for Pareto improving risk sharing mechanisms. Actually, markets are found to be incomplete even at the village level and evidence that the sharecropping institution helps completing markets is exposed. ...French Abstract : Cet article présente le premier test empirique liant directement les profils de consommation des ménages à l'institution tant étudiée du métayage dans les pays en développement. D'une part, la justification théorique du métayage fait souvent appel à ses propriétés de partage de risque. D'autre part, les études empiriques sur le partage de risque en consommation rejettent souvent l'assurance complète mais admettent que des mécanismes formels ou informels permettent aux ménages d'assurer substantiellement leur consommation puisque les chocs de revenu ne sont pas complètement répercutés sur la consommation. Le partage de risque atteint par des ménages ruraux de trois provinces du Pakistan est étudié tout en autorisant un certain degré d'hétérogénéité des préférences et en particulier en ce qui concerne l'aversion au risque. Comme l'assurance parfaite est rejetée, des mécanismes de partage de risque peuvent améliorer l'allocation des ressources. En effet, les marchés sont incomplets même au niveau du village et les tests empiriques montrent que le métayage permet de compléter les marchés. Les ménages capables d'utiliser ce choix contractuel, permettant de partager le risque de production, sont mieux assurés contre les chocs idiosyncratiques. Il semble que le métayage fournisse un bien contingent que les autres marchés accessibles ne permettent pas de répliquer. Ce fait empirique montre que les contrats agricoles jouent un rôle important dans le partage du risque de production. Enfin, grâce au paramètre d'aversion au risque estimé, l'argument du partage de risque dans le choix contractuel prédît par les théories standard Principal-Agent est testé directement. Les agents les plus averses au risque préfèrent les contrats de métayage au contrats de fermage et avec un taux de partage de la production plus faible lorsqu'ils sont plus averses au risque.

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Paper provided by French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse) in its series Economics Working Paper Archive (Toulouse) with number 25.

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Length: 34 p.
Date of creation: 2001
Date of revision:
Handle: RePEc:rea:inrawp:25
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