Insurance

Agriculture / Crop Insurance / Development / Economics / Impact Evaluation / Insurance / Micro / Policy — Comments Off
11
May 11

Index Insurance in Africa

From a post on the New York Times‘ Opinionator blog:

“The insecurity of farming sabotages yields even when the weather is good.  Because of the risk, many farmers are unwilling to bet all their money on a crop, so they sow only a portion of their land.   Or they use poor quality seeds because they do not want to increase their risks by spending more.  Risk makes it very difficult for farmers to get credit to buy needed seeds, fertilizer, herbicides or insecticides, so their yields are stunted.  These are people who can ill afford to get less than the maximum from their plots.

Weather insurance for small farmers has always faced numerous barriers.  But throughout east Africa today there are projects finding creative and innovative ways to overcome them.”

This is quite à propos, as I am going to Washington, DC this weekend for the Index Insurance Innovation Initiative (I4) technical workshop, which will convene the I4 grant recipients to discuss the technical details of index insurance implementation and evaluation.

(HT: Chris Paul.)

 

Development / Insurance / Micro — Comments Off
6
Mar 11

More on Micro-Insurance

More often than not, economic underdevelopment is explained by development economists as being the consequence of multiple market failures. Among these market failures is the lack of insurance markets in most developing countries, which forces individuals and households into sinking considerable resources into averting major risks.

Suppose you are the head of a rural household in an African country. One such risk is the risk you will lose your assets. For example, you could lose some of your land as a consequence of land redistribution within the community, or a disease could decimate a significant fraction of your livestock. Continue reading →

Development / Impact Evaluation / Insurance / Micro — Comments Off
5
Mar 11

Dean Karlan on Micro-Insurance

Innovations for Poverty Action founder and Yale University professor Dean Karlan discusses how to increase the demand for micro-insurance products in developing countries: Continue reading →

Agriculture / Food / Insurance / Micro / Policy — Comments Off
21
Feb 11

Supply and Effects of Specialty Crop Insurance

That is the title of an interesting new NBER working paper by UC Berkeley’s Ethan Ligon. Here is the abstract:

“The federal government has developed a large number of programs to insure various ‘specialty crops’ over the last two decades; a given program is peculiar to a particular county and crop. This development has been particularly notable in California, because of its size and the diversity of crops produced there.

If the extension of federal crop insurance programs to cover fruit and vegetable production has affected either producer or consumer welfare, then we would expect to see this reflected in output and prices. Exploiting variation in the timing of program introduction in different locations for different crops to estimate the effect of crop insurance on the output and prices of the insured crops.

We find that the supply of and demand for insurance for tree crops is much larger than for non-tree crops. Crop insurance has a small but significant negative effect on prices of insured crops. This last finding is consistent with the view that demand for such highly disaggregated commodities is likely to be highly elastic. A consequence is that crop insurance for these specialty crops has little benefit for consumers, even when it generates a large supply response.”

What are the implications of these findings for food policy? For starters, given that consumers — who pay for crop insurance programs via their income taxes — vastly outnumber producers, and given that the welfare impacts of these specialty crop insurance programs on consumers seem negligible, the effect on aggregate welfare is not entirely clear, but one cannot rule out the possibility that these specialty crop insurance programs actually decrease aggregate welfare. Given the political economy of food prices, this should not be surprising to readers of this blog.

I unfortunately could not find an ungated version of this paper. I would gladly link to one if a reader knows of such an ungated version.