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Indirect protection: the impact of cotton insurance on farmers’ income portfolio in Burkina Faso

Listed author(s):
  • Stoeffler, Quentin
  • Wouter, Gelade
  • Catherine, Guirkinger
  • Michael, Carter

While risk is known to harm farmers’ production investments, there is still limited evidence of index-insurance impact on household ex-ante behavior. This paper studies a pilot area-yield index insurance project sold to cotton farmer groups in Burkina Faso. Insurance sales were randomized, and in the treatment area, an encouragement design was generated by providing premium subsidies (between 25% and 75%) randomly distributed to farmer groups. No impact was found on cotton production, most likely in reason of the late sale period (during the sowing period). However, substantial and significant impacts were found on several activities and assets such as field investments, sesame cultivation and livestock herding. The mechanisms behind these indirect effects are discussed. Overall, the findings suggest a promising role of index insurance for stimulating ex-ante investments, but also draws attention on implementation gaps which currently threaten this type of intervention.

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File URL: http://purl.umn.edu/235980
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Paper provided by Agricultural and Applied Economics Association in its series 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts with number 235980.

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Date of creation: 2016
Handle: RePEc:ags:aaea16:235980
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  1. Harold Alderman & John Hoddinott & Bill Kinsey, 2006. "Long term consequences of early childhood malnutrition," Oxford Economic Papers, Oxford University Press, vol. 58(3), pages 450-474, July.
  2. repec:oup:qjecon:v:132:y:2017:i:2:p:811-870. is not listed on IDEAS
  3. Alexis Berg & Philippe Quirion & Benjamin Sultan, 2009. "Weather-index drought insurance in Burkina-Faso: assessment of its potential interest to farmers," Post-Print hal-00520893, HAL.
  4. Oriana Bandiera & Robin Burgess & Narayan Das & Selim Gulesci & Imran Rasul & Munshi Sulaiman, 2017. "Labor Markets and Poverty in Village Economies," The Quarterly Journal of Economics, Oxford University Press, vol. 132(2), pages 811-870.
  5. Stephen R. Boucher & Michael R. Carter & Catherine Guirkinger, 2008. "Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agricultural Development," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 409-423.
  6. Carter, Michael R. & Lybbert, Travis J., 2012. "Consumption versus asset smoothing: testing the implications of poverty trap theory in Burkina Faso," Journal of Development Economics, Elsevier, vol. 99(2), pages 255-264.
  7. Boucher, Stephen R. & Carter, Michael R. & Guirkinger, Catherine, 2008. "AJAE Appendix: Risk Rationing and Wealth Effects in Credit Markets: Theory and Implications for Agriculture Development," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 90(2), May.
  8. Michael Carter & Ghada Elabed & Elena Serfilippi, 2015. "Behavioral economic insights on index insurance design," Agricultural Finance Review, Emerald Group Publishing, vol. 75(1), pages 8-18, May.
  9. Manuela Angelucci & Giacomo De Giorgi, 2009. "Indirect Effects of an Aid Program: How Do Cash Transfers Affect Ineligibles' Consumption?," American Economic Review, American Economic Association, vol. 99(1), pages 486-508, March.
  10. Hans P. Binswanger-Mkhize, 2012. "Is There Too Much Hype about Index-based Agricultural Insurance?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(2), pages 187-200, February.
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