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Pitfalls and potential of institutional change: Rain-index insurance and the sustainability of rangeland management

Author

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  • Birgit Müller

    () (Department of Ecological Modelling, UFZ, Helmholtz Centre for Environmental Research - UFZ, Leipzig, Germany)

  • Martin Quaas

    (Department of Economics, University of Kiel, Germany)

  • Karin Frank

    (Department of Ecological Modelling, UFZ, Helmholtz Centre for Environmental Research - UFZ, Leipzig, Germany)

  • Stefan Baumgärtner

    (Department of Sustainability Sciences, Leuphana University of Lüneburg, Germany)

Abstract

Rain-index insurance is strongly advocated in many parts of the developing world to help farmers to cope with climatic risk that prevail in (semi-)arid rangelands due to low and highly uncertain rainfall. We present a modeling analysis of how the availability of rain-index insurance affects the sustainability of rangeland management. We show that a rain-index insurance with frequent payo s, i.e. a high strike level, leads to the choice of less sustainable grazing management than without insurance available. However, a rain-index insurance with a low to medium strike level enhances the farmer's well-being while not impairing the sustainability of rangeland management.

Suggested Citation

  • Birgit Müller & Martin Quaas & Karin Frank & Stefan Baumgärtner, 2009. "Pitfalls and potential of institutional change: Rain-index insurance and the sustainability of rangeland management," Working Paper Series in Economics 149, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:149
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    References listed on IDEAS

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    Cited by:

    1. repec:spr:nathaz:v:91:y:2018:i:1:d:10.1007_s11069-017-3109-7 is not listed on IDEAS
    2. Antoine Leblois & Philippe Quirion & Benjamin Sultan, 2013. "Price vs. weather shock hedging for cash crops: ex ante evaluation for cotton producers in Cameroon," Working Papers hal-00796528, HAL.
    3. 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.
    4. Sherren, Kate & Fischer, Joern & Fazey, Ioan, 2012. "Managing the grazing landscape: Insights for agricultural adaptation from a mid-drought photo-elicitation study in the Australian sheep-wheat belt," Agricultural Systems, Elsevier, vol. 106(1), pages 72-83.
    5. repec:spr:climat:v:146:y:2018:i:1:d:10.1007_s10584-017-2029-6 is not listed on IDEAS
    6. Bhattacharya, Haimanti & Osgood, Daniel E., 0. "Weather Index Insurance and Common Property Resources," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association.
    7. Bhattacharya, Haimanti & Osgood, Daniel E., 2014. "Weather Index Insurance and Common Property Resources," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(3), December.
    8. Schlüter, Maja & Baeza, Andres & Dressler, Gunnar & Frank, Karin & Groeneveld, Jürgen & Jager, Wander & Janssen, Marco A. & McAllister, Ryan R.J. & Müller, Birgit & Orach, Kirill & Schwarz, Nina & Wij, 2017. "A framework for mapping and comparing behavioural theories in models of social-ecological systems," Ecological Economics, Elsevier, vol. 131(C), pages 21-35.

    More about this item

    Keywords

    ecological-economic modeling; weather-index insurance; Namibia; grazing management; risk; sustainability; weather-based derivatives;

    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
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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