information. Competition, however, may allow the market and explicit contracts to crowd out implicit insurance, even though the latter yields higher welfare. Integrating the principal-agent and shirking models, we explain why different contracting modes coexist in quite homogeneous industries.

of partial insurance, the common test on the degree of informal insurance underestimates the degree of protection offered by informal arrangements. This finding has policy implications because if the degree of informal insurance is partial, but high nonetheless, targeting of transfers (in case of drought

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and possibly conflictual roles. First, they act as conduits for transfers. Second, they act as conduits for information. These features affect the scope for insurance, as well as the severity of punishments in the event of noncompliance. Their interaction leads to a characterization of stable networks

Unpredictable rainfall is an important risk for agricultural activity, and farmers in developing countries often receive incomplete insurance from informal risk-sharing networks. We study the demand for, and effects of, offering formal index-based rainfall insurance through a randomized experiment

We study efficient insurance arrangements when there is complete information but limited commitment because only limited penalties can be imposed if households renege on their promises. Insurance arrangements must therefore take into account the fact that households will renege if benefits from

Households in developing countries use a variety of informal mechanisms to cope with risk, including mutual support and risk-sharing. These mechanisms cannot avoid that they remain vulnerable to shocks. Public programs in the form of food aid distribution and food-for-work programs are meant

directly with inter-household consumption correlations we’re able to identify households which are probably exposed to unusually high amounts of idiosyncratic risk. An obvious use for this identifying information involves targeted interventions to help those households. However, the effectiveness

We study efficient insurance arrangements when there is complete information but limited commitment because only limited penalties can be imposed if households renege on their promises. Insurance arrangements must therefore take into account the fact that households will renege if benefits from

This paper examines the effects of income inequality in a risk sharing model with limited commitment, that is, when insurance agreements have to be self-enforcing. In this context, numerical dynamic programming is used to examine three questions. First, I consider heterogeneity in mean income