Patterns of rainfall insurance participation in rural India
AbstractThis paper describes the contract design and institutional features of an innovative rainfall insurance policy offered to smallholder farmers in rural India and presents preliminary evidence on the determinants of insurance participation. Insurance take-up is found to be decreasing in basis risk between insurance payouts and income fluctuations, higher among wealthy households, and lower among households that are credit constrained. These results match predictions of a simple neoclassical model appended with borrowing constraints. Other patterns are less consistent with the benchmark model. Namely, participation in village networks and measures of familiarity with the insurance vendor are strongly correlated with insurance take-up decisions, and risk averse households are found to be less, not more, likely to purchase insurance. We present evidence suggesting that these results reflect uncertainty about the product itself, given households' limited experience with it.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 302.
Date of creation: 2007
Date of revision:
Other versions of this item:
- Xavier Giné & Robert Townsend & James Vickery, 2008. "Patterns of Rainfall Insurance Participation in Rural India," World Bank Economic Review, World Bank Group, vol. 22(3), pages 539-566, October.
- Gine, Xavier & Townsend, Robert & Vickery, James, 2007. "Patternsof rainfall insurance participation in rural India," Policy Research Working Paper Series 4408, The World Bank.
- NEP-AGR-2007-10-06 (Agricultural Economics)
- NEP-ALL-2007-10-06 (All new papers)
- NEP-CWA-2007-10-06 (Central & Western Asia)
- NEP-DEV-2007-10-06 (Development)
- NEP-IAS-2007-10-06 (Insurance Economics)
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