Weather Index Insurance and Shock Coping : Evidence from Mexico's CADENA Program

Weather risk and incomplete insurance markets are significant contributors to poverty for rural households in developing countries. Weather index insurance has emerged as a possible tool for overcoming these challenges. This paper provides evidence on the impact of weather index insurance from a pioneering, large-scale insurance program in Mexico. The focus of this analysis is on the ex-post effects of insurance payments. A regression discontinuity design provides find evidence that payments from weather index insurance allow farmers to cultivate a larger land area in the season following a weather shock. Households in municipalities receiving payment also appear to have larger per capita expenditures and income in the subsequent year, although there is suggestive evidence that some of this increase is offset by a decrease in remittances. While the cost of insurance appears to be high relative to the payouts, the benefits exceed the costs for a substantial range of outcomes.

Bibliographic Details

Main Authors:	de Janvry, Alain, Ramirez Ritchie, Elizabeth, Sadoulet, Elisabeth
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2016-06
Subjects:	HOUSEHOLD INCOMES, RISKS, IMPACT OF HURRICANES, LANDHOLDINGS, GOVERNMENT EXPENDITURES, PRODUCTION, RISK MANAGEMENT STRATEGIES, PUBLIC ECONOMICS, INCOME POVERTY, INCOME, CROPLAND, INTEREST, RATE OF RETURN, AGRICULTURAL PRODUCTION, EXCHANGE, REMITTANCE, INFORMATION, PROGRAMS, DEVELOPING COUNTRIES, POLITICAL ECONOMY, WELFARE, INSURANCE POLICIES, EFFECTS, AGRICULTURAL ECONOMICS, LOSS RATIO, WEATHER INSURANCE, RURAL POPULATION, INTERNATIONAL BANK, HURRICANES, ECONOMIC ANALYSIS, POVERTY REDUCTION, RISK AVERSE INDIVIDUALS, CROP INSURANCE, RURAL POPULATIONS, UNINTENDED CONSEQUENCES, PER CAPITA INCOME, RURAL HOUSEHOLDS, CROWDING OUT, COSTS OF INSURANCE, INSURANCE MARKETS, PREMIUM PAYMENTS, TRANSFERS, FINANCIAL INSTITUTIONS, MARKETS, HOUSEHOLD INCOME, ORGANIZATIONS, INTERNATIONAL DEVELOPMENT, RETURN, FARMERS, RISK SHARING, CASH TRANSFERS, INSURANCE COVERAGE, INSURANCE POLICY, LIVESTOCK ASSETS, FINANCE, COVARIATE SHOCKS, INVESTMENT DECISIONS, EXPENDITURE, TRANSACTIONS, CONSUMPTION, CREDIT CONSTRAINTS, CLIMATE CHANGE, POLICIES, DROUGHT, RUNNING WATER, CREDIT CONSTRAINT, FUTURE, VALUE, LOSSES, CREDIT, DISASTER RISK FINANCING, CLIMATE, DEMAND, MARKET CONSTRAINTS, MICROINSURANCE, EXPENDITURES, AGRICULTURAL LAND, SMALLHOLDER FARMERS, RURAL, MARKET, RISK TRANSFER, ECONOMICS, POLICY, PRIVATE TRANSFERS, MANAGEMENT, INSURANCE COSTS, INSURANCE, INSURANCE PREMIUMS, LOSS, CONSUMPTION SMOOTHING, THEORY, INSURANCE PAYMENTS, DURABLE, INVESTMENT, ECONOMIC IMPACTS, RISK, INDEMNITY, RURAL AREAS, POVERTY, CREDIT MARKET CONSTRAINTS, TRANSACTIONS COSTS, RISK TAKING, INFORMAL INSURANCE, POOR LIVING, INVESTMENTS, RISK MANAGEMENT, HOUSEHOLD EXPENDITURES, POOR, INDEMNITY PAYMENTS, REMITTANCES, OUTCOMES, BASIS RISK, COVERAGE, BENEFITS, CREDIT MARKET, PREMIUMS,
Online Access:	http://documents.worldbank.org/curated/en/2016/06/26510002/weather-index-insurance-shock-coping-evidence-mexicos-cadena-program http://hdl.handle.net/10986/24632
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