Hot Stuff: Index Insurance for Indian Smallholder Pepper Growers

Wouter Zant

World Development, 2008, vol. 36, issue 9, 1585-1606

Abstract: Summary We simulate the impact of a joint price and yield index insurance on the basis of a small representative panel data set of Indian smallholder pepper growers. Affordable and feasible index insurance reduces crop revenue risk to around 68% of its original level, while a reduction to 50% of this level can be achieved with ideal insurance. Basis risk is large for only a small fraction of farm households. Depending on risk aversion 5-30% of farm households is willing to pay for index insurance, increasing to 12-50% with a 50% premium reduction. Opportunity costs of consumption smoothing in the form of lower productivity levels suggest potential welfare gains of specialization with insurance.

Keywords: crop; index; insurance; basis; risk; willingness; to; pay; incomplete; markets; India; Asia (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (12)

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