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.
