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Pitfalls and potential of institutional change: Rain-index insurance and the sustainability of rangeland management

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Author Info

  • Birgit Müller

    ()
    (Department of Ecological Modelling, UFZ, Helmholtz Centre for Environmental Research - UFZ, Leipzig, Germany)

  • Martin Quaas

    (Department of Economics, University of Kiel, Germany)

  • Karin Frank

    (Department of Ecological Modelling, UFZ, Helmholtz Centre for Environmental Research - UFZ, Leipzig, Germany)

  • Stefan Baumgärtner

    (Department of Sustainability Sciences, Leuphana University of Lüneburg, Germany)

Abstract

Rain-index insurance is strongly advocated in many parts of the developing world to help farmers to cope with climatic risk that prevail in (semi-)arid rangelands due to low and highly uncertain rainfall. We present a modeling analysis of how the availability of rain-index insurance affects the sustainability of rangeland management. We show that a rain-index insurance with frequent payo s, i.e. a high strike level, leads to the choice of less sustainable grazing management than without insurance available. However, a rain-index insurance with a low to medium strike level enhances the farmer's well-being while not impairing the sustainability of rangeland management.

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Bibliographic Info

Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 149.

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Length: 27 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:lue:wpaper:149

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Web page: http://leuphana.de/institute/ivwl.html

Related research

Keywords: ecological-economic modeling; weather-index insurance; Namibia; grazing management; risk; sustainability; weather-based derivatives;

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  1. Haimanti Bhattacharya & Dan Osgood, 2008. "Index Insurance and Common Property Pastures," Working Paper Series, Department of Economics, University of Utah 2008_21, University of Utah, Department of Economics.
  2. Ehrlich, Isaac & Becker, Gary S, 1972. "Market Insurance, Self-Insurance, and Self-Protection," Journal of Political Economy, University of Chicago Press, vol. 80(4), pages 623-48, July-Aug..
  3. Martin F. Quaas & Stefan Baumgärtner, 2006. "Natural vs. financial insurance in the management of public-good ecosystems," Working Paper Series in Economics 34, University of Lüneburg, Institute of Economics.
  4. Hein, Lars & Weikard, Hans-Peter, 2008. "Optimal long-term stocking rates for livestock grazing in a Sahelian rangeland," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 2(2), September.
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  7. Muller, Birgit & Frank, Karin & Wissel, Christian, 2007. "Relevance of rest periods in non-equilibrium rangeland systems - A modelling analysis," Agricultural Systems, Elsevier, vol. 92(1-3), pages 295-317, January.
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  21. Martin F. Quaas & Stefan Baumgärtner, 2011. "Optimal grazing management rules in semi-arid rangelands with uncertain rainfall," Working Paper Series in Economics 193, University of Lüneburg, Institute of Economics.
  22. Stefan Hochrainer & Reinhard Mechler & Georg Pflug, 2009. "Climate change and financial adaptation in Africa. Investigating the impact of climate change on the robustness of index-based microinsurance in Malawi," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 14(3), pages 231-250, March.
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Cited by:
  1. Antoine Leblois & Philippe Quirion & Benjamin Sultan, 2014. "Price vs. weather shock hedging for cash crops: ex ante evaluation for cotton producers in Cameroon," Post-Print halshs-00967313, HAL.
  2. repec:hal:wpaper:hal-00796528 is not listed on IDEAS
  3. Sherren, Kate & Fischer, Joern & Fazey, Ioan, 2012. "Managing the grazing landscape: Insights for agricultural adaptation from a mid-drought photo-elicitation study in the Australian sheep-wheat belt," Agricultural Systems, Elsevier, vol. 106(1), pages 72-83.

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