Patternsof rainfall insurance participation in rural India

Xavier Gine, Robert Townsend and James Vickery ()

No 4408, Policy Research Working Paper Series from The World Bank

Abstract: This paper describes the contract design and institutional features of an innovative rainfall insurance policy offered to smallholder farmers in rural India, and presents preliminary evidence on the determinants of insurance participation. Insurance takeup is found to be decreasing in basis risk between insurance payouts and income fluctuations, increasing in household wealth and decreasing in the extent to which credit constraints bind. These results match with predictions of a simple neoclassical model appended with borrowing constraints. Other patterns are less consistent with the"benchmark"model; namely, participation in village networks and measures of familiarity with the insurance vendor are strongly correlated with insurance takeup decisions, and risk-averse households are found to be less, not more, likely to purchase insurance. We suggest that these results reflect household uncertainty about the product itself, given their limited experience with it.

Keywords: Access to Finance; Banks&Banking Reform; Debt Markets; Insurance&Risk Mitigation (search for similar items in EconPapers)
Date: 2007-11-01
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Patterns of Rainfall Insurance Participation in Rural India (2008)
Working Paper: Patterns of rainfall insurance participation in rural India (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:4408

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