IDEAS home Printed from https://ideas.repec.org/a/pal/gpprii/v44y2019i3d10.1057_s41288-019-00132-y.html
   My bibliography  Save this article

Direct and indirect impact of index-based livestock insurance in Southern Ethiopia

Author

Listed:
  • Ayako Matsuda

    (Ritsumeikan University)

  • Kazushi Takahashi

    (National Graduate Institute for Policy Studies (GRIPS))

  • Munenobu Ikegami

    (Hosei University)

Abstract

This study identifies the period-specific impact of index-based livestock insurance sold to pastoral households in southern Ethiopia, based on 4-year panel data. While the impact of insurance payouts is not consistently positive across all sales periods, we find that they increase household income and milk production during drought years. We also find indirect effects for several seasons, whereby insured households receive more informal transfers when they obtain payouts and they tend to reduce cash savings and livestock holdings. These results suggest that formal insurance can crowd in informal insurance and that pastoralists may reduce their precautionary savings in response to an insurance alternative. Further analysis shows that pastoralists with a herd size around the poverty-trap threshold increase their livestock numbers after receiving payouts.

Suggested Citation

  • Ayako Matsuda & Kazushi Takahashi & Munenobu Ikegami, 2019. "Direct and indirect impact of index-based livestock insurance in Southern Ethiopia," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 44(3), pages 481-502, July.
    • Handle: RePEc:pal:gpprii:v:44:y:2019:i:3:d:10.1057_s41288-019-00132-y
    DOI: 10.1057/s41288-019-00132-y
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41288-019-00132-y
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41288-019-00132-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ward, Patrick S. & Kumar, Neha & De Nicola, Francesca & Hill, Ruth & Makhija, Simrin & Spielman, David J. & Magnan, Nicholas, 2017. "Insuring Against Drought: Evidence on Agricultural Intensification and Demand for Index Insurance from a Randomized Evaluation in Rural Bangladesh," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258090, Agricultural and Applied Economics Association.
    2. Francesca Nicola, 2015. "The impact of weather insurance on consumption, investment, and welfare," Quantitative Economics, Econometric Society, vol. 6(3), pages 637-661, November.
    3. Glenn W. Harrison & Jia Min Ng, 2016. "Evaluating The Expected Welfare Gain From Insurance," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 83(1), pages 91-120, January.
    4. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
    5. Russell Toth, 2015. "Traps and Thresholds in Pastoralist Mobility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(1), pages 315-332.
    6. Veronika Bertram-Huemmer & Kati Kraehnert, 2018. "Does Index Insurance Help Households Recover from Disaster? Evidence from IBLI Mongolia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 145-171.
    7. Jensen, Nathaniel D. & Barrett, Christopher B. & Mude, Andrew G., 2017. "Cash transfers and index insurance: A comparative impact analysis from northern Kenya," Journal of Development Economics, Elsevier, vol. 129(C), pages 14-28.
    8. Zant, Wouter, 2008. "Hot Stuff: Index Insurance for Indian Smallholder Pepper Growers," World Development, Elsevier, vol. 36(9), pages 1585-1606, September.
    9. Takahashi, Kazushi & Ikegami, Munenobu & Sheahan, Megan & Barrett, Christopher B., 2016. "Experimental Evidence on the Drivers of Index-Based Livestock Insurance Demand in Southern Ethiopia," World Development, Elsevier, vol. 78(C), pages 324-340.
    10. Sarah A Janzen & Michael R Carter, 2019. "After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(3), pages 651-671.
    11. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, vol. 35(5), pages 835-856, May.
    12. Travis J. Lybbert & Christopher B. Barrett & Solomon Desta & D. Layne Coppock, 2004. "Stochastic wealth dynamics and risk management among a poor population," Economic Journal, Royal Economic Society, vol. 114(498), pages 750-777, October.
    13. Hill, Ruth Vargas & Kumar, Neha & Magnan, Nicholas & Makhija, Simrin & de Nicola, Francesca & Spielman, David J. & Ward, Patrick S., 2017. "Insuring against droughts: Evidence on agricultural intensification and index insurance demand from a randomized evaluation in rural Bangladesh," IFPRI discussion papers 1630, International Food Policy Research Institute (IFPRI).
    14. Kazushi Takahashi & Christopher B Barrett & Munenobu Ikegami, 2019. "Does Index Insurance Crowd In or Crowd Out Informal Risk Sharing? Evidence from Rural Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(3), pages 672-691.
    15. Barnett, Barry J. & Barrett, Christopher B. & Skees, Jerry R., 2008. "Poverty Traps and Index-Based Risk Transfer Products," World Development, Elsevier, vol. 36(10), pages 1766-1785, October.
    16. Shawn Cole & Xavier Giné & James Vickery, 2017. "How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment," The Review of Financial Studies, Society for Financial Studies, vol. 30(6), pages 1935-1970.
    17. Kati Kraehnert & Veronika Bertram-Huemmer, 2018. "Weather Index Insurance Can Help Households Recover from Extreme Weather Events," DIW Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 8(40), pages 385-391.
    18. Mario J. Miranda & Katie Farrin, 2012. "Index Insurance for Developing Countries," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 34(3), pages 391-427.
    19. Ayako Matsuda & Takashi Kurosaki, 2019. "Demand for temperature and rainfall index insurance in India," Agricultural Economics, International Association of Agricultural Economists, vol. 50(3), pages 353-366, May.
    20. Christopher Barrett & Paswel Phiri Marenya & John Mcpeak & Bart Minten & Festus Murithi & Willis Oluoch-Kosura & Frank Place & Jean Claude Randrianarisoa & Jhon Rasambainarivo & Justine Wangila, 2006. "Welfare dynamics in rural Kenya and Madagascar," Journal of Development Studies, Taylor & Francis Journals, vol. 42(2), pages 248-277.
    21. Christopher B. Barrett & John G. McPeak, 2006. "Poverty Traps and Safety Nets," Economic Studies in Inequality, Social Exclusion, and Well-Being, in: Alain Janvry & Ravi Kanbur (ed.), Poverty, Inequality and Development, chapter 0, pages 131-154, Springer.
    22. Santos, Paulo & Barrett, Christopher B., 2011. "Persistent poverty and informal credit," Journal of Development Economics, Elsevier, vol. 96(2), pages 337-347, November.
    23. Alain Janvry & Ravi Kanbur (ed.), 2006. "Poverty, Inequality and Development," Economic Studies in Inequality, Social Exclusion, and Well-Being, Springer, number 978-0-387-29748-4, Fall.
    24. Christopher B. Barrett, 2011. "Covariate Catastrophic Risk Management in the Developing World: Discussion," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 93(2), pages 512-513.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Takahashi, Kazushi & Noritomo, Yuma & Ikegami, Munenobu & Jensen, Nathaniel D., 2020. "Understanding pastoralists’ dynamic insurance uptake decisions: Evidence from four-year panel data in Ethiopia," Food Policy, Elsevier, vol. 95(C).
    2. Erwin Bulte & Rein Haagsma, 2021. "The Welfare Effects of Index-Based Livestock Insurance: Livestock Herding on Communal Lands," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 78(4), pages 587-613, April.
    3. Meike Will & Jürgen Groeneveld & Karin Frank & Birgit Müller, 2021. "Informal risk-sharing between smallholders may be threatened by formal insurance: Lessons from a stylized agent-based model," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-18, March.
    4. Glenn Harrison & Karlijn Morsink & Mark Schneider, 2022. "Literacy and the quality of index insurance decisions," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 47(1), pages 66-97, March.
    5. Seré, Carlos, 2020. "Investing Sustainably in African Livestock Development: Opportunities and Trade-Offs," Working Papers 305186, University of Bonn, Center for Development Research (ZEF).
    6. Moritz, Laura & Kuhn, Lena & Bobojonov, Ihtiyor, 2022. "Crop index insurance for more welfare and climate resilience? An experimental approach," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322096, Agricultural and Applied Economics Association.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Takahashi, Kazushi & Noritomo, Yuma & Ikegami, Munenobu & Jensen, Nathaniel D., 2020. "Understanding pastoralists’ dynamic insurance uptake decisions: Evidence from four-year panel data in Ethiopia," Food Policy, Elsevier, vol. 95(C).
    2. Nathaniel Jensen & Munenobu Ikegami & Andrew Mude, 2017. "Integrating Social Protection Strategies for Improved Impact: A Comparative Evaluation of Cash Transfers and Index Insurance in Kenya," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 42(4), pages 675-707, October.
    3. Jensen, Nathaniel D. & Mude, Andrew G. & Barrett, Christopher B., 2018. "How basis risk and spatiotemporal adverse selection influence demand for index insurance: Evidence from northern Kenya," Food Policy, Elsevier, vol. 74(C), pages 172-198.
    4. Takahashi, Kazushi & Ikegami, Munenobu & Sheahan, Megan & Barrett, Christopher B., 2016. "Experimental Evidence on the Drivers of Index-Based Livestock Insurance Demand in Southern Ethiopia," World Development, Elsevier, vol. 78(C), pages 324-340.
    5. Hansen, James & Hellin, Jon & Rosenstock, Todd & Fisher, Eleanor & Cairns, Jill & Stirling, Clare & Lamanna, Christine & van Etten, Jacob & Rose, Alison & Campbell, Bruce, 2019. "Climate risk management and rural poverty reduction," Agricultural Systems, Elsevier, vol. 172(C), pages 28-46.
    6. Takahashi, Kazushi & Ikegami, Munenobu & Sheahan, Megan & Barrett, Christopher B., 2014. "Quasi-experimental evidence on the drivers of index-based livestock insurance demand in Southern Ethiopia," IDE Discussion Papers 480, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Janzen, Sarah A. & Carter, Michael R., 2013. "The Impact of Microinsurance on Consumption Smoothing and Asset Protection: Evidence from a Drought in Kenya," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151141, Agricultural and Applied Economics Association.
    8. Quentin Stoeffler & Michael Carter & Catherine Guirkinger & Wouter Gelade, 2022. "The Spillover Impact of Index Insurance on Agricultural Investment by Cotton Farmers in Burkina Faso," The World Bank Economic Review, World Bank, vol. 36(1), pages 114-140.
    9. Sarah A Janzen & Michael R Carter, 2019. "After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 101(3), pages 651-671.
    10. Stoeffler, Quentin & Opuz, Gülce, 2022. "Price, information and product quality: Explaining index insurance demand in Burkina Faso," Food Policy, Elsevier, vol. 108(C).
    11. Sarah A. Janzen & Michael R. Carter & Munenobu Ikegami, 2021. "Can insurance alter poverty dynamics and reduce the cost of social protection in developing countries?," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(2), pages 293-324, June.
    12. Jensen, Nathaniel D. & Barrett, Christopher B. & Mude, Andrew G., 2017. "Cash transfers and index insurance: A comparative impact analysis from northern Kenya," Journal of Development Economics, Elsevier, vol. 129(C), pages 14-28.
    13. Mogge, Lukas, 2023. "A District-Level Analysis of the Effect of Risk Exposure on the Demand for Index Insurance in Mongolia," Ruhr Economic Papers 1018, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    14. Moritz, Laura & Kuhn, Lena & Bobojonov, Ihtiyor, 2022. "Crop index insurance for more welfare and climate resilience? An experimental approach," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322096, Agricultural and Applied Economics Association.
    15. Jensen, Nathaniel & Barrett, Christopher B. & Mude, Andrew, 2014. "Index Insurance and Cash Transfers: A Comparative Analysis from Northern Kenya," MPRA Paper 61372, University Library of Munich, Germany.
    16. Katharina Lehmann-Uschner & Kati Krähnert, 2018. "When Shocks Become Persistent: Household-Level Asset Growth in the Aftermath of an Extreme Weather Event," Discussion Papers of DIW Berlin 1759, DIW Berlin, German Institute for Economic Research.
    17. You, Jing, 2014. "Risk, under-investment in agricultural assets and dynamic asset poverty in rural China," China Economic Review, Elsevier, vol. 29(C), pages 27-45.
    18. Sakketa, Tekalign G. & Kornher, Lukas, 2021. "Unintended Consequences or a Glimmer of Hope? Comparative Impact Analysis of Cash Transfers and Index Insurance on Pastoralists’ Labor Allocation Decisions," 2021 Conference, August 17-31, 2021, Virtual 315113, International Association of Agricultural Economists.
    19. Hill, Ruth Vargas & Kumar, Neha & Magnan, Nicholas & Makhija, Simrin & de Nicola, Francesca & Spielman, David J. & Ward, Patrick S., 2019. "Ex ante and ex post effects of hybrid index insurance in Bangladesh," Journal of Development Economics, Elsevier, vol. 136(C), pages 1-17.
    20. Chantarat, Sommarat & Mude, Andrew G. & Barrett, Christopher B. & Turvey, Calum G., 2017. "Welfare Impacts of Index Insurance in the Presence of a Poverty Trap," World Development, Elsevier, vol. 94(C), pages 119-138.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:gpprii:v:44:y:2019:i:3:d:10.1057_s41288-019-00132-y. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.