RISK AND INSURANCE IN VILLAGE INDIA

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