Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: May, 1994, Volume 62, Issue 3

Risk and Insurance in Village India<539:RAIIVI>2.0.CO;2-9
p. 539-591

Robert M. Townsend

The full insurance model is tested using data from three poor, high risk villages in the semi-arid tropics of southern India. The model presented here incorporates a number of salient features of the actual village economies. Although the model is rejected statistically, it does provide a surprisingly good benchmark. Household consumptions comove with village average consumption. More clearly, household consumptions are not much influenced by contemporaneous own income, sickness, unemployment, or other idiosyncratic shocks, controlling for village consumption (i.e. for village level risk). There is evidence that the landless are less well insured than their village neighbors in one of the three villages.

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