Insurance and rural welfare: what can panel data tell us?

Chris Elbers, Jan Willem Gunning and Lei Pan

Applied Economics, 2009, vol. 41, issue 24, pages 3093-3101

Abstract: Assessing the scope for insurance in rural communities usually requires a structural model of household behaviour 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 article 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: 2009

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Related works:
Working Paper: Insurance and Rural Welfare: What can Panel Data tell us? (2007)
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