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Productive Spillovers of the Take-up of Index-Based Livestock Insurance

Russell Toth, Christopher Barrett (), Richard Bernstein, Patrick Clark, Carla Gomes, Shibia Mohamed, Andrew Mude and Birhanu Taddesse

No 172441, 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota from Agricultural and Applied Economics Association

Abstract: Does the provision of livestock insurance raise the unintended consequence of stimulating excessive herd accumulation and less environmentally-sustainable herd movement patterns? The impact of insurance is theoretically ambiguous: if precautionary savings motives for holding livestock assets dominate, then we would expect to see households that receive index insurance reduce herd sizes and move less intensively. However if risk-adjusted investment motives dominate then we would expect them to build herds and move more. “Behavioural” or norm-based responses are also possible. To test between these theoretical possibilities we use the randomized provision of livestock insurance paired with novel, high frequency data collection. The results suggest that in the presence of insurance pastoralists accumulate larger herds, and move more intensively. This has implications for the potential ecological impacts scaling up of index insurance programs on the pastoralist rangelands, and for microinsurance and pastoralism more broadly.

Keywords: Community/Rural/Urban Development; Environmental Economics and Policy; Food Security and Poverty; International Development; Livestock Production/Industries (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-ias and nep-mfd
Date: 2014-06
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea14:172441

DOI: 10.22004/ag.econ.172441

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