“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...

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...