 A heterogeneous agent model of credit-linked index insurance and farm technology adoptionKatie Farrin and Mario Miranda () Journal of Development Economics, 2015, vol. 116, issue C, 199-211 Abstract: Protection from downside risk is a determinant of technology uptake among subsistence agricultural households. Access to credit, insurance and savings may stimulate technology adoption where new methods are riskier but higher-yielding or require sunk costs. In this paper, we employ a dynamic, stochastic, heterogeneous agent model where farm households have access to contingent credit and make savings, technology and loan repayment choices. Our approach is novel as insurance is modeled as a meso-level product, where the bank is indemnified before any payouts are distributed to borrowers; thus, it accounts for both supply- and demand-side concerns, showing a flow of effects when index insurance contracts are sold to risk aggregators for whom basis risk is lower. Results show letting the lender lay first claim on indemnities lowers default, which can decrease interest rates and expand credit access. Insurance and savings may also spur technology uptake. Keywords: Weather insurance; Technology adoption; Numerical methods (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:116:y:2015:i:c:p:199-211 DOI: 10.1016/j.jdeveco.2015.05.001 Access Statistics for this article Journal of Development Economics is currently edited by M. R. Rosenzweig More articles in Journal of Development Economics from Elsevier |
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