Abstract
Credit contracts play a direct role in pooling risk between households in northern Nigeria. Repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders. The paper develops two models of state-contingent loans. The first is a competitive equilibrium in perfectly enforceable contracts. The second permits imperfect information and equilibrium default. Estimates of both models indicate that quantitatively important state-contingent payments are embedded in these loan transactions, but that a fully efficient risk-pooling equilibrium is not achieved. The research is based on a year-long survey in Zaria, Nigeria conducted by the author.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 495-526 |
| Number of pages | 32 |
| Journal | Review of Economic Studies |
| Volume | 61 |
| Issue number | 3 |
| DOIs | |
| State | Published - Jul 1994 |
Funding
Acknowledgements. I received valuable advice from the members and chairman of the Department of Agricultural Economics and Rural Sociology, Ahmadu Bello University, where I was a visiting Research Fellow. Able and dedicated research assistance was provided by Adex Adisa, Comfort Amos, Mary Arokoyo, Florence Bako, Christiana Chindo, Abdu Haruna, Haruna Mohammad, Ayuba Randa, and Yohanna Tanko. I am grateful to Clive Bell, Richard Blundell, John Ham, Jim Heckman, Barbara O'Brien, Dayo Phillip, T. N. Srinivasan, John Strauss, Anand Swamy, Duncan Thomas, Tara Vishwanath, David Weiman and participants at a number of seminars for their comments. This material is based upon work supported by the National Science Foundation under Grants No. SES-8618906 and SES-9210982. I also acknowledge financial support from the Social Science Research Council, the Fulbright-Hays Research Abroad programme, and the Yale Center for International and Area Studies.
ASJC Scopus subject areas
- Economics and Econometrics
