Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies
Journal of Economic Perspectives
vol. 9,
no. 3, Summer 1995
(pp. 83–102)
(Complimentary)
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.Citation
Townsend, Robert M. 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies." Journal of Economic Perspectives, 9 (3): 83–102. DOI: 10.1257/jep.9.3.83JEL Classification
- O12 Microeconomic Analyses of Economic Development
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