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Productive Spillovers of the Take-up of Index-Based Livestock Insurance

Author

Listed:
  • Toth, Russell
  • Barrett, Christopher B.
  • Bernstein, Richard
  • Clark, Patrick
  • Gomes, Carla
  • Mohamed, Shibia
  • Mude, Andrew
  • Taddesse, Birhanu

Abstract

Does the provision of livestock insurance raise the unintended consequence of stimulating excessive herd accumulation and less environmentally-sustainable herd movement patterns? The impact of insurance is theoretically ambiguous: if precautionary savings motives for holding livestock assets dominate, then we would expect to see households that receive index insurance reduce herd sizes and move less intensively. However if risk-adjusted investment motives dominate then we would expect them to build herds and move more. “Behavioural” or norm-based responses are also possible. To test between these theoretical possibilities we use the randomized provision of livestock insurance paired with novel, high frequency data collection. The results suggest that in the presence of insurance pastoralists accumulate larger herds, and move more intensively. This has implications for the potential ecological impacts scaling up of index insurance programs on the pastoralist rangelands, and for microinsurance and pastoralism more broadly.

Suggested Citation

  • Toth, Russell & Barrett, Christopher B. & Bernstein, Richard & Clark, Patrick & Gomes, Carla & Mohamed, Shibia & Mude, Andrew & Taddesse, Birhanu, 2014. "Productive Spillovers of the Take-up of Index-Based Livestock Insurance," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 172441, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea14:172441
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    File URL: http://purl.umn.edu/172441
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    References listed on IDEAS

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    1. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 597-652.
    2. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 128(1), pages 1-51.
    3. Sommarat Chantarat & Andrew G. Mude & Christopher B. Barrett & Michael R. Carter, 2013. "Designing Index-Based Livestock Insurance for Managing Asset Risk in Northern Kenya," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 80(1), pages 205-237, March.
    4. Sommarat Chantarat & Christopher B. Barrett & Andrew G. Mude & Calum G. Turvey, 2007. "Using Weather Index Insurance to Improve Drought Response for Famine Prevention," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(5), pages 1262-1268.
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