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Informal Risk Sharing, Index Insurance, and Risk Taking in Developing Countries


  • Ahmed Mushfiq Mobarak
  • Mark R. Rosenzweig


Preliminary findings are presented from a research project which examined the interactions between informal risk sharing, index insurance and risk-taking. Rainfall insurance contracts were randomly offered to cultivating and landless households in a set of Indian villages where preexisting census data on caste networks allowed the characterization of the nature and extent of informal risk sharing. We study how informal risk sharing mediates the demand for index insurance, whether index insurance or informal indemnification allows farmers to invest in risky technologies, and the general equilibrium effects of offering insurance contracts to cultivators and agricultural laborers.

Suggested Citation

  • Ahmed Mushfiq Mobarak & Mark R. Rosenzweig, 2013. "Informal Risk Sharing, Index Insurance, and Risk Taking in Developing Countries," American Economic Review, American Economic Association, vol. 103(3), pages 375-380, May.
  • Handle: RePEc:aea:aecrev:v:103:y:2013:i:3:p:375-80 Note: DOI: 10.1257/aer.103.3.375

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    References listed on IDEAS

    1. Arnott, Richard & Stiglitz, Joseph E, 1991. "Moral Hazard and Nonmarket Institutions: Dysfunctional Crowding Out or Peer Monitoring?," American Economic Review, American Economic Association, vol. 81(1), pages 179-190, March.
    2. Ahmed Mushfiq Mobarak & Mark Rosenzweig, 2012. "Selling Formal Insurance to the Informally Insured," Working Papers 1007, Economic Growth Center, Yale University.
    3. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
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    1. repec:eee:agisys:v:156:y:2017:i:c:p:149-176 is not listed on IDEAS
    2. Groh, Matthew & McKenzie, David, 2016. "Macroinsurance for microenterprises: A randomized experiment in post-revolution Egypt," Journal of Development Economics, Elsevier, vol. 118(C), pages 13-25.
    3. Veronika Bertram-Huemmer & Kati Kraehnert, 2015. "Does Index Insurance Help Households Recover from Disaster? Evidence from IBLI Mongolia," Discussion Papers of DIW Berlin 1515, DIW Berlin, German Institute for Economic Research.
    4. Shawn Cole & Daniel Stein & Jeremy Tobacman, 2014. "Dynamics of Demand for Index Insurance: Evidence from a Long-Run Field Experiment," American Economic Review, American Economic Association, vol. 104(5), pages 284-290, May.
    5. Ahsan, Syed M & Mahmud, Minhaj, 2011. "Microinsurance: The Choice among Delivery and Regulatory Mechanisms," MPRA Paper 50286, University Library of Munich, Germany, revised Jul 2013.
    6. 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).
    7. Attanasio, O. & Augsburg, B. & de Haas, Ralph, 2016. "Microcredit Contracts, Risk Diversification and Loan Take-Up," Discussion Paper 2016-020, Tilburg University, Center for Economic Research.
    8. Gharad Bryan & Shyamal Chowdhury & Ahmed Mushfiq Mobarak, 2014. "Underinvestment in a Profitable Technology: The Case of Seasonal Migration in Bangladesh," Econometrica, Econometric Society, vol. 82, pages 1671-1748, September.
    9. McDermott,Thomas K.J., 2016. "Investing in disaster risk management in an uncertain climate," Policy Research Working Paper Series 7631, The World Bank.
    10. Ricome, Aymeric & Affholder, François & Gérard, Françoise & Muller, Bertrand & Poeydebat, Charlotte & Quirion, Philippe & Sall, Moussa, 2017. "Are subsidies to weather-index insurance the best use of public funds? A bio-economic farm model applied to the Senegalese groundnut basin," Agricultural Systems, Elsevier, vol. 156(C), pages 149-176.
    11. Antoine Leblois & Philippe Quirion & Benjamin Sultan, 2013. "Price vs. weather shock hedging for cash crops: ex ante evaluation for cotton producers in Cameroon," CIRED Working Papers hal-00796528, HAL.
    12. Sawada, Yasuyuki & Takasaki, Yoshito, 2017. "Natural Disaster, Poverty, and Development: An Introduction," World Development, Elsevier, vol. 94(C), pages 2-15.
    13. Songsermsawas, Tisorn & Baylis, Kathy & Chhatre, Ashwini & Michelson, Hope, 2016. "Can Peers Improve Agricultural Revenue?," World Development, Elsevier, vol. 83(C), pages 163-178.
    14. Cárcamo, Jorge & Cramon-Taubadel, Stephan von, 2016. "Assessing small-scale raspberry producers' risk and ambiguity preferences: Evidence from field-experiment data in rural Chile," DARE Discussion Papers 1610, Georg-August University of Göttingen, Department of Agricultural Economics and Rural Development (DARE).
    15. Todo, Yasuyuki & Kozuka, Eiji & Sawada, Yasuyuki, 2016. "Can School-Based Management Generate CommunityWide Impacts in Less Developed Countries? Evidence from Randomized Experiments in Burkina Faso," Working Papers 115, JICA Research Institute.
    16. repec:eee:corfin:v:47:y:2017:i:c:p:46-71 is not listed on IDEAS
    17. Platteau, Jean-Philippe & De Bock, Ombeline & Gelade, Wouter, 2017. "The Demand for Microinsurance: A Literature Review," World Development, Elsevier, vol. 94(C), pages 139-156.
    18. Andrew D. Foster & Esther Gehrke, 2017. "Consumption Risk and Human Capital Accumulation in India," NBER Working Papers 24041, National Bureau of Economic Research, Inc.
    19. Norton, Michael & Boucher, Stephen & Verteramo Chiu, Leslie, 2015. "Geostatistics, Basis Risk, and Index Insurance," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205755, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    20. repec:pal:gpprii:v:42:y:2017:i:4:d:10.1057_s41288-017-0060-5 is not listed on IDEAS
    21. Sawada, Yasuyuki & Aida, Takeshi & Griffen, Andrew & Kazianga, Harounan & Kozuka, Eiji & Nogushi, Haruko & Todo, Yasuyuki, 2016. "On the Role of Community Management in Correcting Market Failures of Rural Developing Areas: Evidence from a Randomized Field Experiment of COGES Project in Burkina Faso," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236323, Agricultural and Applied Economics Association.
    22. Prasann, Ashesh, 2015. "The Spillover Effects of Public Works on Migration, Labor Allocation and Wages: Evidence from National Rural Employment Guarantee Scheme, India," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205750, Agricultural and Applied Economics Association;Western Agricultural Economics Association.

    More about this item

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification


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