Insuring Peace: Index-Based Livestock Insurance, Droughts, and Conflict

Kai Gehring and Paul Schaudt

No 10423, CESifo Working Paper Series from CESifo

Abstract: We provide quasi-experimental evidence of how an innovative market-based solution using remote-sensing technology can mitigate drought-induced conflict. Droughts are a major driver of conflict in Africa, particularly between nomadic pastoralists and sedentary farmers. The Index-Based Livestock Insurance (IBLI) piloted in Kenya provides automated, preemptive payouts to pastoralists affected by droughts. Combining plausibly exogenous variation in rainfall and the staggered rollout of IBLI in Kenya over the 2001-2020 period, we find that IBLI strongly reduces drought-induced conflict. Key mechanisms are an income smoothing effect and reduced migratory pressure for pastoralists, reducing the likelihood of miscoordination with other land users. Our study suggests that market-based solutions are a scalable, cost-effective pathway to mitigate conflict, complementing political solutions such as institutional reforms.

Keywords: conflict; conflict resolution; climate change; droughts; pastoralism; insurance; ICT; resources (search for similar items in EconPapers)
JEL-codes: D74 G22 G52 O13 Q34 Q54 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-agr, nep-dev, nep-env and nep-ict
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10423

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