Work

Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies

Year: 1995

Type: article

Abstract: The hypothesis of full risk sharing can be taken to data from low-income countries and evaluate formal and informal financial systems. In many contexts, idiosyncratic risks are high, so credit/insurance arrangements could be beneficial. Statistical tests reveal that households in southern India take advantage of these possibilities; villages in Cote d'Ivoire and countries in Thailand do not do as well. The paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems. The full information and mechanism design frameworks provide benchmarks for policy analysis.

Source: The Journal of Economic Perspectives

DOI: 10.1257/jep.9.3.83

Author: Robert M Townsend

Institution: University of Chicago

Language: English

Topic: Agricultural risk and resilience

Subfield: Soil Science

Field: Agricultural and Biological Sciences

Domain: Life Sciences

SDGs: No poverty, Industry, innovation and infrastructure, Reduced inequalities

Open Access status: bronze

Funders: World Bank Group, Princeton University, University of Minnesota, Johns Hopkins University