IDEAS home Printed from
   My bibliography  Save this paper

Index Insurance and Common Property Pastures


  • Haimanti Bhattacharya
  • Dan Osgood


This paper presents a theoretical model to investigate the potential environmental consequences of weather index based insurance, a tool for mitigating weather risk that is gaining momentum in developing countries. We model potential effects of index insurance for pastoralists on animal stocking decisions and the resulting effects on common property resource quality. We find that although this proposed financial tool has the potential of significantly enhancing the welfare of pastoralists by enhancing expected payoffs and reducing the exit of pastoralists, under certain conditions the insurance can worsen overstocking problems in low rainfall states of nature. In these cases, the insurance has an unintended negative effect on pasture quality that can undermine the long run sustainability of the common pool resource. Model extensions show that low error seasonal climate forecasts and/or reduction in ex-post stock readjustment costs arising from market imperfections can help in mitigating this potential negative effect.

Suggested Citation

  • Haimanti Bhattacharya & Dan Osgood, 2008. "Index Insurance and Common Property Pastures," Working Paper Series, Department of Economics, University of Utah 2008_21, University of Utah, Department of Economics.
  • Handle: RePEc:uta:papers:2008_21

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Müller, Birgit & Quaas, Martin F. & Frank, Karin & Baumgärtner, Stefan, 2011. "Pitfalls and potential of institutional change: Rain-index insurance and the sustainability of rangeland management," Ecological Economics, Elsevier, vol. 70(11), pages 2137-2144, September.

    More about this item


    Index Insurance; Pasture; Common Property;

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uta:papers:2008_21. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.