Insurance and Rural Welfare: What Can Panel Data Tell Us?
Assessing the scope for insurance in rural communities usually requires a structural model of household behavior under risk. One of the few empirical applications of such models is the study by Rosenzweig and Wolpin (1993) who conclude that Indian farmers in the ICRISAT villages would not benefit from the introduction of formal weather insurance. In this paper we investigate how models such as theirs can be estimated from panel data on production and assets. We show that if assets can take only a limited number of values the coefficients of the model cannot be estimated with reasonable precision. We also show that this can affect the conclusion that insurance would not be welfare improving.
|Date of creation:||2007|
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- Rosenzweig, Mark R & Binswanger, Hans P, 1993.
"Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments,"
Royal Economic Society, vol. 103(416), pages 56-78, January.
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- Rosenzweig, Mark R. & Wolpin, Kenneth I., 1989. "Credit Market Constraints, Consumption Smoothing and the Accumulation of Durable Production Assets in Low-Income Countries: Investments in Bullocks in India," Bulletins 7487, University of Minnesota, Economic Development Center.
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