Insurance Market Efficiency and Crop Choices in Pakistan

Marcel Fafchamps, Takashi Kurosaki, Institute of Economic Research, Hitotsubashi University and Japan

No 12, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper tests the efficiency of insurance markets in the Pakistan Punjab by examining how crop choices are affected by the presence of price and yield risk. We estimate reduced-form and structural models of crop choices. Although we cannot reject the hypothesis that village members efficiently share risk among themselves, production choices are shown to depend on risk. Existing risk sharing and self-insurance mechanisms thus imperfectly protect Punjab farmers against village-level shocks. Results also indicate that households respond to consumption price risk, thereby suggesting that empirical and theoretical work on risk should avoid putting an exclusive emphasis on yield and output price risk.

Keywords: risk; agricultural development; household models; insurance markets; structural estimation (search for similar items in EconPapers)
JEL-codes: O12 Q12 (search for similar items in EconPapers)
Date: 2000-07-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Insurance market efficiency and crop choices in Pakistan (2002)
Working Paper: Insurance Market Efficiency and Crop Choices in Pakistan (1998)
Working Paper: Insurance Market Efficiency and Crop Choices in Pakistan (1997)
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