Formal Markets and Informal Insurance

19 Pages Posted: 6 Mar 2011

See all articles by Ethan A. Ligon

Ethan A. Ligon

University of California, Berkeley; Giannini Foundation

Date Written: June 5, 2004


“Contractual interlinkages” in the rural communities of developing countries may be a key element of informal insurance when information is incomplete, and may influence the evolution of the distribution of resources. The introduction of “modern” credit markets may undermine these interlinkages, and consequently limit the usefulness of informal insurance. Using data which assigns households in a transitional Indian village to either a “modern” or “traditional” regime, we examine differences in financial transactions across these regimes. Traditional hoseholds receive more frequent “in-kind” transfers of food and clothing, While also more frequently making “in-kind” payments of crop output to others in the village.

Suggested Citation

Ligon, Ethan A., Formal Markets and Informal Insurance (June 5, 2004). Available at SSRN: or

Ethan A. Ligon (Contact Author)

University of California, Berkeley ( email )

207 Giannini Hall #3310
Berkeley, CA 94720-3310
United States

Giannini Foundation

UC Davis
Davis, CA 95616
United States

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