1 Apec 8703 Lecture #9 Risk And Insurance: Empirical Studies from Developing Countries I. Introduction Lecture 8 described how, in theory, insurance and credit markets allow rural households to smooth consumption. Does this really happen? This lecture examines 3 papers that attempted to find out. Two examine whether rural households in India can smooth their consumption, and the third does the same for Northern Nigeria. II. Risk and Insurance in Village India (Townsend, 1994) There are several possible ways for agricultural households to smooth their consumption when their income is risky: 1. Farm multiple plots, each with different characteristics. 2. Store grain from one year to the next. 3. Sell agricultural assets in bad years, buy in good years. 4. Borrow money from formal and informal lenders. 5. Informal insurance networks with family and friends.