Safety nets and index based insurance: Historical assessment and semi-paramentric estimation of an indemnity schedule for Northern Ghana

V. Molini, M. Keyzer, G.J.M. van den Boom, W. Zant, N.N.N. Nsowah-Nuamah

    Research output: Contribution to JournalArticleAcademicpeer-review

    Abstract

    Important new trends are modifying the external conditions faced by west African farmers. Climate change is already seen to alter rainfall patterns, while increasing yield volatility. Consequently, in rural West Africa, the covariate component of agricultural risks is getting stronger and threatens the village community as a whole. The safety net was applied to villages in northern Ghana, where informal mutual arrangements cushion idiosyncratic shocks. Results without external subsidy and with the official poverty-line indicate that an index-based safety-net would be capable of reducing by 20 percentage points the poverty incidence from an initial level of 63% and prove to be quite robust under Monte-Carlo resampling. Insurance markets are grossly underdeveloped in west Africa. Apart from the classical reasons for market failure related to asymmetric information and covariate-risk among participants, both particularly prominent in rural Ghana, the lack of effective legal systems to enforce formal contracts severely discourages such arrangements.
    Original languageEnglish
    Pages (from-to)671-712
    JournalEconomic Development and Cultural Change
    Volume58
    Issue number4
    DOIs
    Publication statusPublished - 2010

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    indemnity
    West Africa
    Ghana
    insurance
    poverty
    village
    asymmetric information
    safety
    village community
    legal system
    market
    market failure
    subsidy
    incidence
    farmer
    climate change
    rainfall
    lack
    trend
    index

    Cite this

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    title = "Safety nets and index based insurance: Historical assessment and semi-paramentric estimation of an indemnity schedule for Northern Ghana",
    abstract = "Important new trends are modifying the external conditions faced by west African farmers. Climate change is already seen to alter rainfall patterns, while increasing yield volatility. Consequently, in rural West Africa, the covariate component of agricultural risks is getting stronger and threatens the village community as a whole. The safety net was applied to villages in northern Ghana, where informal mutual arrangements cushion idiosyncratic shocks. Results without external subsidy and with the official poverty-line indicate that an index-based safety-net would be capable of reducing by 20 percentage points the poverty incidence from an initial level of 63{\%} and prove to be quite robust under Monte-Carlo resampling. Insurance markets are grossly underdeveloped in west Africa. Apart from the classical reasons for market failure related to asymmetric information and covariate-risk among participants, both particularly prominent in rural Ghana, the lack of effective legal systems to enforce formal contracts severely discourages such arrangements.",
    author = "V. Molini and M. Keyzer and {van den Boom}, G.J.M. and W. Zant and N.N.N. Nsowah-Nuamah",
    year = "2010",
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    pages = "671--712",
    journal = "Economic Development and Cultural Change",
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    publisher = "University of Chicago",
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    }

    Safety nets and index based insurance: Historical assessment and semi-paramentric estimation of an indemnity schedule for Northern Ghana. / Molini, V.; Keyzer, M.; van den Boom, G.J.M.; Zant, W.; Nsowah-Nuamah, N.N.N.

    In: Economic Development and Cultural Change, Vol. 58, No. 4, 2010, p. 671-712.

    Research output: Contribution to JournalArticleAcademicpeer-review

    TY - JOUR

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    AU - Molini, V.

    AU - Keyzer, M.

    AU - van den Boom, G.J.M.

    AU - Zant, W.

    AU - Nsowah-Nuamah, N.N.N.

    PY - 2010

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    N2 - Important new trends are modifying the external conditions faced by west African farmers. Climate change is already seen to alter rainfall patterns, while increasing yield volatility. Consequently, in rural West Africa, the covariate component of agricultural risks is getting stronger and threatens the village community as a whole. The safety net was applied to villages in northern Ghana, where informal mutual arrangements cushion idiosyncratic shocks. Results without external subsidy and with the official poverty-line indicate that an index-based safety-net would be capable of reducing by 20 percentage points the poverty incidence from an initial level of 63% and prove to be quite robust under Monte-Carlo resampling. Insurance markets are grossly underdeveloped in west Africa. Apart from the classical reasons for market failure related to asymmetric information and covariate-risk among participants, both particularly prominent in rural Ghana, the lack of effective legal systems to enforce formal contracts severely discourages such arrangements.

    AB - Important new trends are modifying the external conditions faced by west African farmers. Climate change is already seen to alter rainfall patterns, while increasing yield volatility. Consequently, in rural West Africa, the covariate component of agricultural risks is getting stronger and threatens the village community as a whole. The safety net was applied to villages in northern Ghana, where informal mutual arrangements cushion idiosyncratic shocks. Results without external subsidy and with the official poverty-line indicate that an index-based safety-net would be capable of reducing by 20 percentage points the poverty incidence from an initial level of 63% and prove to be quite robust under Monte-Carlo resampling. Insurance markets are grossly underdeveloped in west Africa. Apart from the classical reasons for market failure related to asymmetric information and covariate-risk among participants, both particularly prominent in rural Ghana, the lack of effective legal systems to enforce formal contracts severely discourages such arrangements.

    U2 - 10.1086/652476

    DO - 10.1086/652476

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