Hot stuff: Index Insurance for Indian Pepper Growers

    Research output: Contribution to JournalArticleAcademicpeer-review

    Abstract

    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. © 2008 Elsevier Ltd. All rights reserved.
    Original languageEnglish
    Pages (from-to)1585-1606
    Number of pages22
    JournalWorld Development
    Volume36
    Issue number9
    DOIs
    Publication statusPublished - 2008

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    insurance
    farm
    opportunity costs
    panel data
    smallholder
    premium
    smoothing
    specialization
    revenue
    productivity
    welfare
    index
    Insurance
    crop
    cost
    household
    Farm households

    Cite this

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    title = "Hot stuff: Index Insurance for Indian Pepper Growers",
    abstract = "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. {\circledC} 2008 Elsevier Ltd. All rights reserved.",
    author = "W. Zant",
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    }

    Hot stuff: Index Insurance for Indian Pepper Growers. / Zant, W.

    In: World Development, Vol. 36, No. 9, 2008, p. 1585-1606.

    Research output: Contribution to JournalArticleAcademicpeer-review

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