Informal insurance in renewable resource harvesting

Rabindra Nath Chakraborty

European Review of Agricultural Economics, 2002, vol. 29, issue 2, 219-236

Abstract: A general equilibrium model is presented where a small number of resource users share part of their harvests with each other. As the productivity of resource harvest is stochastic, the sharing rule can be interpreted as an informal insurance contract. As individual labour inputs are unobservable, an exogenous increase in the insurance premium causes individuals to expend less effort on harvesting. However, the resulting inefficiency is reduced by an increase in the expected long-run level of the resource stock. A second-best efficient level of sharing exists, which is positive but smaller than the first-best level if the resource stock per capita is small. Copyright 2002, Oxford University Press.

Date: 2002
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European Review of Agricultural Economics is currently edited by Timothy Richards, Salvatore Di Falco, Céline Nauges and Vincenzina Caputo

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