Patternsof 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 takeup is found to be decreasing in basis risk between insurance payouts and income fluctuations, increasing in household wealth and decreasing in the extent to which credit constraints bind. These results match with 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 takeup decisions, and risk-averse households are found to be less, not more, likely to purchase insurance. We suggest that these results reflect household uncertainty about the product itself, given their limited experience with it.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 4408.
Date of creation: 01 Nov 2007
Date of revision:
; Access to Finance; Banks&Banking Reform; Debt Markets; Insurance&Risk Mitigation;
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.
- Xavier Giné & Robert Townsend & James Vickery, 2007. "Patterns of rainfall insurance participation in rural India," Staff Reports 302, Federal Reserve Bank of New York.
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