Regulation of any market can either promote or impede its development, thus affecting social welfare. In this paper, we are concerned with the impact of regulation in microinsurance markets. We evaluate existing and potential regulatory mechanisms with regard to its underlying economic...

Incentivizing unobservable effort in risky environments, such as in insurance, credit, and labor markets, is vital as moral hazard may otherwise cause significant welfare losses including the outright failure of markets. Ensuring incentive-compatibility through state-contingent contracts between...