Recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income, thus rejecting the hypothesis of full risk-pooling. We attempt to explain these observations by adding limited commitment...

This paper analyzes a model of private unemployment insurance under limited commitment and a model of public unemployment insurance subject to moral hazard in an economy with a continuum of agents and an infinite time horizon. The dynamic and steady-state properties of the optimum private...

We examine a dynamic model of mutual insurance when households can also engage in self insurance by storage. We assume that there is no enforcement mechanism, so that any insurance is informal, and must be self-enforcing. We show that consumption allocations satisfy a modified Euler condition...

Recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income, thus rejecting the hypothesis of full risk-pooling. We attempt to explain these observations by adding limited commitment...

The fluctuations in incomes inherent in rural communities can be attenuated by reciprocal insurance. We develop a model of such insurance based on self-interested behaviour and voluntary participation. One individual assists another only if the costs of so doing are outweighed by the benefits...