Get in the zone: The risk-adjusted welfare effects of data-driven vs. administrative borders for index insurance zones

Ella Kirchner, Elinor Benami, Andrew Hobbs, Michael R. Carter and Zhenong Jin

Journal of Development Economics, 2026, vol. 180, issue C

Abstract: Agricultural index insurance aims to protect producers from widespread shocks within defined areas, often based on administrative boundaries. However, these boundaries may poorly reflect yield variation, imposing costs on both policyholders and the public. Advances in geospatial data accessibility and clustering techniques offer potential to define more homogeneous insurance zones. This study evaluates the impact of redrawing zone boundaries based on observed agri-environmental conditions in western Kenya. Using over 13,000 crop cut observations with satellite-based estimates on growing conditions, we assess how data-driven zones affect producer welfare in a simulated area-yield index insurance program. While some data-driven zones modestly improve risk reduction with a fixed number of zones, greater flexibility in zone number and field sampling intensity offers more potential to balance performance and cost. We present a conceptual model and empirical simulations to characterize how zone design and data collection intensity jointly shape insurance outcomes in resource-constrained settings.

Keywords: Earth observation; Clustering; Agriculture; Yields; Maize (search for similar items in EconPapers)
JEL-codes: G52 Q54 R11 R12 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:deveco:v:180:y:2026:i:c:s0304387825002093

DOI: 10.1016/j.jdeveco.2025.103658

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