Formal and informal insurance: experimental evidence from Ethiopia

Guush Berhane, Stefan Dercon, Ruth Hill and Alemayehu Taffesse

No 211331, 2015 Conference, August 9-14, 2015, Milan, Italy from International Association of Agricultural Economists

Abstract: We examine the impact of formal insurance and informal risk-sharing institutions on welfare, and the complementarity between these forms of formal and informal insurance. As in a number of other studies, formal rainfall index insurance was offered to farmers. However in this study support to local risk sharing institutions—iddirs—was also provided to strengthen the extent to which they were able to insure members against idiosyncratic shocks. Access to insurance and support to iddirs was randomized across villages during two agricultural seasons. Results show that formal insurance has a significant impact on encouraging productive investments, particularly investments in fertilizer, replicating the results found in Ghana in Karlan et al (2013). Strengthening risk-sharing through iddirs increases formal insurance demand (consistent with the results in Dercon et al 2013) and some welfare outcomes, but does not cause insurance to have any additional effect on productive outcomes. There is also some evidence that strengthening risk-sharing through local institutions reduces individual bilateral transfers.

Keywords: International Development; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 28
Date: 2015
New Economics Papers: this item is included in nep-exp, nep-ias and nep-mfd
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:iaae15:211331

DOI: 10.22004/ag.econ.211331

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