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Hot Stuff: Index Insurance for Indian Smallholder Pepper Growers

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  • Zant, Wouter

Abstract

Summary We simulate the impact of a joint price and yield index insurance on the basis of a small representative panel data set of Indian smallholder pepper growers. Affordable and feasible index insurance reduces crop revenue risk to around 68% of its original level, while a reduction to 50% of this level can be achieved with ideal insurance. Basis risk is large for only a small fraction of farm households. Depending on risk aversion 5-30% of farm households is willing to pay for index insurance, increasing to 12-50% with a 50% premium reduction. Opportunity costs of consumption smoothing in the form of lower productivity levels suggest potential welfare gains of specialization with insurance.

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  • Zant, Wouter, 2008. "Hot Stuff: Index Insurance for Indian Smallholder Pepper Growers," World Development, Elsevier, vol. 36(9), pages 1585-1606, September.
    • Handle: RePEc:eee:wdevel:v:36:y:2008:i:9:p:1585-1606
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    6. Belissa, Temesgen Keno & Lensink, Robert & van Asseldonk, Marcel, 2020. "Risk and ambiguity aversion behavior in index-based insurance uptake decisions: Experimental evidence from Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 718-730.
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